When taking out a bridging loan you will be required to provide details of your exit strategy, the method by which you will pay back the loan.
Bridging loans are an extremely valuable form of short-term finance that can help businesses to quickly acquire money to cover an expense before credit becomes available to them.
Just some of the reasons that businesses use bridging loans include funding unexpected expenses, paying urgent debts, and investing in time-sensitive business opportunities.
Before rushing in and requesting a bridging loan though it’s very important that you create a plan for paying back the money. This is called your exit strategy.
The price of a poor exit strategy
When you take out a bridging loan you will agree a date by which the debt will be repaid. If you cannot repay the amount by this time you will need to consult with your loan provider about what happens next.
In some instances, it may be possible to extend the loan, but beware that this is not always the case. A late repayment could end up costing you a considerable amount in renewal costs or late payment penalties, as well as having a negative effect on your credit rating, so it’s wise to ensure that you have a reliable exit strategy in place before going ahead.
Typical exit strategies
Your exit strategy will depend entirely on your business’ unique circumstances and the reason that you required the bridging loan.
A few examples of typical exit strategies include:
- Selling a property or land
- Selling debt to a collection agency
- Selling shares or assets
For further information about bridging loans,or help and advice with creating a sound exit strategy, get in touch with our team of experts here at Richmond Asset Finance by calling us on 0113 288 3277.