When evaluating loan applications, private lenders focus intensely on one question that traditional banks often overlook:

"How exactly will this loan be repaid at maturity?"

Your exit strategy – the specific plan for repaying the principal amount when the loan term ends – is often the single most critical factor in a private lender's decision.

Private lenders know that short-term loans (6-24 months) aren't about long-term amortization. They're about deliberate, timely exits. With interest-only payments and a balloon repayment at maturity, there's no room for vague answers.

A clear, well-supported exit strategy reflects financial readiness and increases your chances of approval significantly.

Private lenders evaluate exit strategies through several key dimensions. Here's what you need to prepare:

1. Refinance Exit Strategies

These involve using another loan to repay the private loan. Lenders will want to understand why bank financing isn't available now, how and when the barriers will be resolved, and whether you have evidence of bank discussions or pre-approvals. Serviceability is key: provide income evidence that will meet future lending criteria. For instance, a borrower using private funds to clear an ATO debt may then become eligible for refinance with a mainstream lender.

2. Sale Exit Strategies

Selling the property or asset is another common exit. A strong case includes a recent market analysis, realistic sale timeframes, a clear marketing strategy, and value-add improvements like renovation or DA approval. For development projects, pre-sales or expressions of interest help significantly to establish credibility.

3. Business Revenue Exit Strategies

In some cases, ongoing business cashflow will be the source of repayment. Provide historical financials, realistic revenue forecasts, and secured contracts or clients to support your projections. Private lenders generally discount overly optimistic forecasts unless there is compelling evidence behind them.

4. Alternative Exit Options

If your primary exit doesn't go as planned, do you have a backup? Secondary assets that can be sold, guarantor support, or a partial repayment schedule can offer comfort to lenders. Some borrowers may even include a possible term extension under clearly defined scenarios. The best applications demonstrate not just a Plan A, but a thoughtful Plan B.

1. Match your exit strategy to the security type and loan purpose. Development sites generally exit through sale. Income-producing assets are more suited to refinance. Business working capital loans often rely on revenue. Logical alignment makes your plan more credible.

2. Provide concrete evidence supporting your exit timeline. This might include bank pre-approvals, written broker feedback, agent appraisals, or signed contracts. Specific documentation boosts credibility.

3. Develop and document multiple exit options. Contingency planning matters. If the first plan fails, your ability to pivot quickly can make all the difference. Lenders look favorably on borrowers who anticipate and mitigate risk.

As we've explored across this series, private lenders evaluate opportunities through a sophisticated three-pillar framework that assesses security quality, borrower capability, and exit strategy viability. The strongest loan applications present compelling evidence across all three dimensions, but particular strength in one area can sometimes compensate for challenges in another.

By understanding this framework and preparing your application accordingly, you position yourself for success even when traditional banks say no. Private lenders aren't looking for perfect situations – they're looking for manageable risks with clear paths to successful outcomes.

Goodland understands how private lenders think. We work closely with borrowers to develop strong, evidence-backed exit strategies that support successful outcomes.