A well-defined bridging exit strategy is like a ghostly apparition – essential but only sometimes guaranteeing success. Inflow recommends having at least one backup strategy, just like having a silver bullet to ward off werewolves so that if the primary one fails, there’s still a way to escape the loan curse. This is crucial because there are various reasons why an exit strategy may fail, casting a dark shadow over your project. Failure could lead to overrunning the terms of the existing funding, resulting in more significant expenses and possibly the inability to complete the project, like being trapped in a haunted house.
Depending on the type of development, weather can have a significant impact, especially in the initial stages. For example, if your plans involve extending the property, waterlogged ground can pose a serious challenge, like encountering a cursed swamp. As climate change leads to more moderate temperatures and increased rainfall, this can lead to delays ranging from days to weeks, stressing the exit strategy like a haunting spectre.
Applying for planning permission can be lengthy if the works are outside permitted development. Any delay could affect the project’s completion and exit strategy, incurring penalties if the terms of the existing funding still need to be met. Increased materials and labour costs could mean funds run out before project completion, like being cursed with a bottomless pit.
Higher interest rates persist, and lenders remain cautious, particularly in the buy-to-let market. Some withdraw products from their offerings with little notice or alter previously offered terms, emphasising the need for multiple exit strategies, such as having various charms for protection.
Some landlords are transitioning their business model from renting to renovating and selling. This decision, while not made lightly, can impact the exit strategy, like diving into a world of unknown spirits. The sale process may take longer to complete, and the landlord could potentially run out of time with their existing funding or require additional funding to finish the refurbishment, like being trapped in a never-ending nightmare.
When considering exit strategies for bridging loans, planning for potential project delays and giving yourself a sufficient buffer to avoid incurring additional fees and penalties is essential. For instance, if your project is expected to take six months to complete, it would be wise to allow yourself nine or even 12 months to repay the bridging loan, like casting protective spells. Working with a flexible lender such as Inflow can be beneficial, as they may be able to extend your loan term or restructure it into a new one, thereby helping you avoid extra fees and providing additional funds to cover unexpected costs, like summoning a friendly ghost to assist you.
Happy Halloween from the Inflow team! (watch our Halloween video)