Bridging Loan Exit Strategy: What it is and why It matters

What is an Exit Strategy for a Bridging Loan?

If you're considering short-term property finance, understanding your exit strategy for a Bridging Loan is essential. Bridging Loans are designed to be repaid quickly—typically within 1 to 18 months—so lenders require a clear plan for how the loan will be repaid at the end of the term. This repayment plan is known as the exit strategy.

In this guide, we'll explore:

• What an exit strategy is
• Why it’s important to have a strong exit strategy
• Which options are commonly accepted by lenders like Mercantile Trust
• What makes a strong Exit Strategy?

What is an exit strategy?

An exit strategy is your planned method for repaying a bridging loan at the end of its short-term period (typically 1–18 months). It answers the question:

“How will the loan be repaid?”

In property finance, an exit strategy is crucial because bridging loans are interest-only and not designed for long-term use. Lenders require a clear, realistic, and evidence-based exit plan before approving the loan.

Acceptable Bridging Loan Exit Strategies

At Mercantile Trust and many other specialist lenders, the following exit strategies are typically acceptable:

1. Sale of the Property

The most common exit strategy is to sell the property that the loan is secured against. This is especially common in property development or refurbishment projects, where the property is improved and sold for profit.

2. Refinancing

Borrowers often plan to refinance the Bridging Loan with a longer-term mortgage—such as a Buy to Let, residential, or commercial mortgage. This is suitable when you're buying an unmortgageable property and intend to make it eligible for mainstream finance.

3. Sale of another asset

If you're retaining the secured property, you may repay the Bridging Loan by selling another asset—such as a different property, a business, or a high-value item. This option requires clear evidence that the asset will be sold within the loan term.

4. Inheritance or windfall

In some cases, the exit may come from a guaranteed inheritance or future windfall, such as a pension lump sum or business sale. However, this strategy must be well-documented and legally supported.

5. Business or investment income

If you have sufficient and regular cash flow from a business or investment portfolio, this may be an acceptable strategy—especially when the loan-to-value (LTV) is low. You’ll need to provide detailed evidence of income.

What makes a strong Exit Strategy?

Lenders look for the following qualities in a good exit strategy:

• Realistic: Can the plan be executed within the loan term?
• Evidence-based: Is there documentation to back up the plan (e.g. sale agreement, mortgage offer, probate)?
• Timely: Does the timeline align with the loan expiry?
• Reliable: Is there a contingency plan if delays occur?

Why your Exit Strategy matters to Mercantile Trust

At Mercantile Trust, we take a flexible and common sense approach to Bridging Finance. While we always require a clear exit plan, we understand that not all circumstances are the same. We’re happy to consider alternative or complex scenarios—especially when backed by strong documentation and experience.

Final Thoughts

A solid exit strategy is not just a lender requirement—it’s your roadmap to successful Bridging Finance. Whether you're flipping a property, refinancing after refurbishing, or accessing funds before an asset sale, having a clear and achievable plan is key.

If you’re exploring Bridging Loans and want guidance on structuring your exit strategy, contact Mercantile Trust today. Our experienced team is here to help you find a solution that fits your project and timeline.