Quick answer
The exit from a short-term property loan is how it will be repaid at the end of the term: a property or business sale, a refinance to a bank or non-bank lender, a contract or insurance payment, or business income. A good exit is specific, dated and backed by evidence. Stress-test it by asking what happens if it's two or three months late, choose a term with that buffer, and start preparing a refinance months before expiry.
Key points
- Lenders approve short-term property loans on the strength of the exit.
- Good exits are specific, dated and evidenced.
- Build a buffer of at least two to three months past the expected date.
- Start a refinance months before the loan expires, not weeks.
With a bank loan, the lender’s main question is whether you can make the repayments. With a short-term property loan, such as a caveat, a bridge or a private mortgage, the main question is different: how will this loan end? That’s the exit, and it’s the part of the application private lenders read most closely. It’s also the part borrowers most often underestimate.
The four common exits
| Exit | Example | What makes it strong |
|---|---|---|
| Sale | Selling a property, a second business or an asset | An exchanged, unconditional contract with a settlement date |
| Refinance | Moving to a bank, non-bank or longer private loan | A formal approval, or a clear path to one |
| Payment | A contract stage, retention, insurance claim or debtor | A signed contract or letter with a date and amount |
| Income | Repaying from trading over the term | Statements showing surplus that covers the repayments |
Some loans use a combination: part repaid from a payment, the balance refinanced.
What makes an exit strong or weak
A strong exit is:
- Specific. “The sale of 14 Smith Street” rather than “selling something”.
- Dated. A settlement or payment date, not “later in the year”.
- Evidenced. A contract, approval letter or statement you can attach.
- Independent of hope. It doesn’t rely on a market rising, a customer suddenly paying or an approval nobody has applied for yet.
A weak exit is one where any of those are missing. Lenders may still lend on a weaker exit, but expect a lower amount, a shorter term or a higher cost, and expect more questions.
Stress-test your exit
Before you sign, run three scenarios:
- On time. The exit happens on the expected date. Does the term cover it comfortably?
- Late. It happens two or three months later. Does your term still cover it? If not, what would an extension cost?
- Fails. It doesn’t happen at all. What’s your backup? A different sale, a refinance, a family member’s support, another asset?
If scenario two takes you past the end of the term, choose a longer term now. The extra cost of a few more months is almost always less than an extension fee negotiated under pressure. If scenario three has no answer, think hard about whether a short-term loan is right, or whether a longer second mortgage or first mortgage would suit you better.
Refinance exits need the most planning
Refinancing to a bank or non-bank lender is the most common exit for private loans, and the one that most often runs late. Banks take time, and they’ll want everything the private lender didn’t: lodged tax returns, current financials, clean recent banking and a clear explanation of the private loan.
A month-by-month plan for a twelve-month private loan with a bank refinance exit:
| When | What to do |
|---|---|
| Month 1 | Ask your accountant what the bank will need and when it can be ready |
| Months 2 to 4 | Lodge any overdue returns and BAS; keep business banking clean |
| Months 4 to 6 | Clear or formalise any ATO debt; avoid new short-term borrowing |
| Month 6 | Talk to a broker or bank about an indicative assessment |
| Months 7 to 8 | Submit the full refinance application |
| Months 9 to 10 | Approval, valuation and documents |
| Month 11 | Settlement of the refinance, with a month to spare |
If the private loan is shorter, compress the plan but keep the order. The most common mistake is starting at month ten.
Sale exits: watch the net figure
If the exit is a sale, work out what you’ll actually receive, not just the price. Agent’s commission, legal costs, any capital gains tax or GST, and repayment of the existing mortgage all come out first. Your accountant can estimate the tax. Only the net amount is available to repay the short-term loan, and lenders will do this calculation too.
Payment exits: confirm the payer
If a customer, builder or insurer is paying you, check the payment is real and on schedule. Is the contract signed? Has the progress claim been approved? Has the insurer accepted the claim in writing? A payment exit is only as strong as the party making the payment.
Tell everyone involved
If your exit depends on other people, such as a buyer, an agent, a builder or your accountant, make sure they know the date matters. A conveyancer who knows a short-term loan is waiting on settlement will chase the other side harder. An accountant who knows a refinance depends on this year’s return will prioritise it.
What to do if the exit slips
- Tell the lender early. As soon as you know there’s a problem, not the week before expiry.
- Explain the new timeline and the evidence behind it.
- Ask about options: an extension, a partial repayment now, or a change of exit.
- Get the costs in writing before agreeing to anything.
- Consider refinancing to a longer loan if the delay is substantial.
Lenders deal with delays regularly. What turns a delay into a serious problem is silence.
An illustrative example
A Bunbury builder takes a $340,000 caveat loan over an investment property to fund the completion of two spec homes, with the exit being their sale. The expected sale date is five months away. Stress-testing it, the builder realises a slow market could push the sales to eight or nine months, so chooses a ten-month term. The first house sells in month six and the second in month eight, and the loan is repaid in full with two months to spare and no extension fee. Illustrative only.
Income exits: be realistic about surplus
Repaying a short-term property loan from trading income can work, but it’s the exit lenders scrutinise most. They’ll look at your bank statements to see how much is genuinely left over each month after wages, rent, tax and other loans. If the loan needs $15,000 a month to clear in time and your average surplus is $9,000, the exit doesn’t work, however good the business feels. Either lengthen the term, reduce the amount or add a second exit, such as a partial refinance.
Keep records as you go
Keep the loan contract, the exit evidence and any correspondence with the lender together. If you’re refinancing, your new lender will want to see how the short-term loan was used and that it was managed properly. Good records also help your accountant treat the loan costs correctly at tax time.
Talk about your exit before you borrow
If you’re considering a short-term property loan, tell us how you plan to repay it and when. We’ll help you stress-test it and choose a sensible term. There’s no credit check when you enquire, your enquiry isn’t passed to a pile of lenders, and one person will call you to talk it through. A clear, honest exit is what gets short-term loans approved quickly. Make an enquiry.
Frequently asked questions
What counts as a strong exit?
Something specific with evidence: an exchanged sale contract, a formal refinance approval, a signed contract with a payment date, or an insurance settlement letter. Hoping to sell or refinance 'at some point' is weak.
How much buffer should I build in?
As a rule of thumb, at least two to three months beyond the date you expect, more if the exit depends on a third party such as a buyer, builder or bank.
What if my exit falls through?
Contact the lender as early as possible. Options include an extension, switching to a different exit, or refinancing to a longer loan. Acting early gives you more choices.
Can I repay early if the exit arrives sooner?
Often, but check the contract before signing. Some loans prepay or set minimum interest, which affects how much you save by repaying early.