What is a bridging loan exit strategy?
When taking out a bridging loan, it’s crucial to have a clear exit strategy to ensure you can repay the loan on time and avoid any penalties or fees. Here are some common exit strategies for bridging loans:
- Sale of the property: One of the most common exit strategies for a bridging loan is to sell the property purchased with the loan. This can be done once the property has been renovated or developed or when the borrower’s existing property is sold and the funds are available to repay the loan.
- Refinancing: Another option is to refinance the bridging loan with a long-term mortgage or another form of financing. This allows the borrower to repay the bridging loan and avoid penalties or fees while securing more favourable financing terms over the long term.
- Equity release: If the borrower has equity in another property, they may be able to use this as collateral to release funds and repay the bridging loan.
- Cash injection: In some cases, borrowers may be able to inject additional cash into the project to help repay the bridging loan. This could come from personal savings or investors or partners in the project.
Borrowers must consider their options carefully and have a clear plan to repay the loan before taking out a bridging loan. Borrowers should work with a reputable lender or broker who can provide guidance and advice on the best exit strategy for their needs and circumstances.
How can Sterling Commercial Finance Help?
At Sterling Commercial Finance, we’ve been helping businesses access funding for over 20 years. Get in touch with the team today to see how we can help your business.