The importance of exit strategies in bridging finance

Why exit strategies matter
 
A bridging loan can be agreed in days, but it can all fall apart if the exit isn’t watertight. A robust exit strategy isn’t just about future planning – it’s an important part of the bridging underwriting process and can make all the difference between a swift approval or a declined application.
 
A bridging loan is designed to be repaid within a fixed, short period, often six to 18 months. That means lenders, brokers, and borrowers all need to be confident that there is a clearly defined and achievable plan to repay the loan when the term ends. Without this, borrowers risk being forced into emergency refinancing, paying additional interest, or even defaulting on the facility.
 
Exit planning should never be an afterthought. In fact, it should form the backbone of the entire funding strategy and a lender’s willingness to offer a  facility, and on what terms, will hinge on the strength of the proposed exit route.
 
Common exit routes
 
The two most common exit strategies for bridging loans are refinancing onto a longer-term mortgage and selling the property to repay the facility. Both options are used frequently in the market and can be viable depending on the borrower’s circumstances. However, not all lenders accept both.
 
At Castle Trust Bank, for example, we only accept refinancing as a suitable exit strategy. This is a deliberate policy, based on our experience of the risks associated with sale-based exits.
 
Selling a property may sound straightforward, but it introduces a wide range of variables that can delay or even derail the exit. Buyers can pull out, valuations can fall short, legal issues can arise, and wider market conditions can change quickly. All of these factors make the outcome – and more importantly, the timing – less predictable.
 
Because of this unpredictability, lenders that accept sale as an exit strategy must hold additional capital reserves to offset the risk. This, in turn, increases their cost of funding, which can be reflected in higher pricing for all borrowers.
 
A refinance-based exit should provide a more stable and controllable route out of bridging finance. It allows the borrower to move onto a longer-term mortgage – typically a buy-to-let or commercial facility – once their short-term objective has been achieved.
 
This could be after completing refurbishment works, securing planning permission, or simply taking ownership of a property that was previously unmortgageable.
 
Importantly, refinance can often be planned at the outset of the bridging application. When working with a lender like Castle Trust Bank, which offers both bridging and term products, this can create a seamless path from acquisition through to long-term ownership.
 
This approach gives borrowers greater control over the timeline and outcome of their investment. It removes the reliance on finding a buyer and eliminates exposure to fluctuations in the sales market.
 
For brokers, helping clients secure both the short-term and long-term funding with the same lender can also reduce delays, duplication of effort, and legal costs.
 
Alternative exit strategies could also include the sale of another asset owned by the borrower, or a hybrid approach, such as refinancing part of the loan and selling other assets.
 
Supporting development strategies
 
Exit planning is particularly important in development finance. Many developers find themselves in a position where their scheme is complete, but they still need time to market the units or decide whether to sell, retain, or let them.
 
In these cases, a development exit bridging loan provides a practical solution, enabling the developer to repay their typically more expensive development finance facility with a lower-rate loan, whilst also giving them more time and flexibility to realise the full value of the scheme.
 
A recent transaction completed by Castle Trust Bank demonstrates this in action. We worked with Sirius Property Finance to structure a £9.6 million loan on a five-storey residential conversion in Birmingham. The scheme included 69 one- and two-bedroom apartments and had a total value of £13.2 million.
 
The client wanted the option to sell some units and retain others to generate rental income. To support this strategy, we structured the facility as a hybrid loan. Part of the funding was provided as a bridging loan on the properties being marketed for sale, and part as a five-year fixed rate buy-to-let mortgage on the units being retained.
 
After nine months, the bridging element was set to convert into a serviced loan, giving the client even greater flexibility to adjust their strategy as the market evolved.
 
The importance of contingency planning
 
Even the best-laid plans can change, so it’s important for borrowers to consider alternative exit routes, should their intended strategy prove unsuccessful.
 
For example, if a refinance is delayed due to a valuation issue, can the borrower inject more equity to reduce the LTV? If a chosen lender changes criteria, are there other providers available that can step in? If market rents fall, how will that impact affordability for a term loan?
 
Lenders like Castle Trust Bank will always assess whether the primary exit is robust, but advisers can add real value by ensuring clients also have a plan B, and ideally even a plan C.
 
This kind of proactive planning not only increases the chances of a successful outcome but can also speed up approvals by demonstrating that the borrower has considered all possible scenarios.
 
How Castle Trust Bank supports structured exits
 
At Castle Trust Bank, our proposition is built around giving property investors confidence at every stage of their investment journey.
 
We provide short-term bridging finance for property acquisition, refurbishment, auction purchases and development exit. We also offer term lending on a range of buy-to-let properties, including single lets, HMOs and multi-unit freehold blocks.
 
This joined-up approach enables us to support the full lifecycle of an investment – from initial purchase through to refinance – under one roof.
 
Where appropriate, we also use tools like title insurance and dual legal representation to speed up completions and reduce transaction friction, helping borrowers act quickly when timing is critical.

Final thoughts
 
A strong exit strategy protects both the lender and the borrower, and it ensures that a short-term funding solution remains just that.
 
Brokers have a key role to play in helping clients define their exit plans clearly, select the right lender based on those plans, and prepare contingencies that will protect the investment if conditions change.
 
By focusing on the exit from day one, advisers can help clients make smarter, more sustainable decisions, and ultimately deliver better long-term outcomes.