Every lender, whether funding a modest refurbishment or a multi-million-pound development, ultimately cares about one thing: being repaid. The borrower’s vision, the quality of the site, even the developer’s track record all carry weight — but none of it matters if the exit is uncertain. This is why exit risk has become the single greatest concern in property finance.
As we explored in Why Every Bridging Loan Needs a Clear Exit Strategy, the endgame of repayment is what lenders focus on most. A weak or speculative exit plan can collapse an application entirely. For borrowers, understanding why lenders are so sensitive to exit risk — and structuring strategies to mitigate it — is essential not just for securing funding, but for ensuring projects remain profitable.
Exit risk is the risk that the borrower cannot repay the loan when it falls due. Because most property finance is short term in nature — bridging loans, development facilities, or refurbishment finance — lenders want a clearly defined repayment route. That might be through the sale of the finished property, refinancing into a longer-term facility, or a combination of the two.
The risk arises when that repayment plan depends on uncertain or fragile assumptions. A borrower who expects to sell quickly at a premium, or refinance without checking today’s stress tests, is asking the lender to take a leap of faith. And lenders, especially in the current climate, are unwilling to do so.
The past two years have reminded lenders how volatile markets can be. Rising build costs, fluctuating interest rates, and variations in demand across regions have all made repayment less predictable. Even in prime areas, sales can take longer. Refinancing has also become harder, with buy-to-let lenders tightening affordability criteria and private banks placing stricter demands on international borrowers.
As discussed in Development Finance Exits Explained: The Borrower’s Guide, today’s credit committees are not simply asking how a project will be built, but how it will be repaid. A borrower who cannot demonstrate resilience against market headwinds is unlikely to win approval.
When considering an application, lenders usually begin with the numbers. Are the projected sales values realistic compared with local comparables? Is the rental yield sufficient to meet today’s buy-to-let stress tests? Has the borrower factored in marketing and legal timelines, or are they assuming immediate sales? For a refresher on how affordability tests vary between property types, see our guide on What’s the Difference Between a Residential and Buy-to-Let Mortgage?.
But lenders also consider qualitative factors. They look at the borrower’s track record: has this developer successfully executed exits before? They review the broker’s analysis: has the refinance been tested with real lenders, or is it merely theoretical? And increasingly, they look for contingency planning. A credible “Plan B” exit — such as a refinance option if sales slow — can reassure a lender that repayment is still secure, even if the primary plan falters.
Consider a developer who intends to exit via the sale of newly built flats in a regional city. On paper, the GDV supports the loan. But if recent comparable sales have been slow, or if local supply is increasing, the risk of delayed sales becomes significant. Unless the borrower shows evidence of demand, such as pre-sales or strong agent interest, a cautious lender may reduce the facility or decline the application outright.
Alternatively, imagine a landlord planning to refinance a refurbished block onto a buy-to-let mortgage. If rental yields are marginal and just about meet stress test requirements at today’s rates, the lender will question what happens if rates rise before completion. A detailed analysis of this challenge can be found in Bridging to Mortgage: How to Transition Smoothly in 2025, where timing and affordability pressures are examined closely.
Exit risk doesn’t just determine whether a loan is approved; it also influences the pricing, leverage, and structure of the facility. A borrower with a watertight exit plan may secure higher loan-to-value, lower interest rates, and more flexible terms. One with a weaker plan may find the lender demanding more equity, charging higher rates, or insisting on staged drawdowns.
This is why experienced borrowers treat exit planning as part of their negotiation strategy. By presenting a strong, evidenced case for how the loan will be repaid, they reduce the lender’s perception of risk — and are rewarded with better terms. For a deeper dive into how leverage and repayment interact, see our guide to LTV vs. LTC: What’s the Difference in Lending?.
Exit failures usually stem from the same core issues. Overestimating GDV is perhaps the most common, especially when developers assume sales values based on buoyant conditions that no longer exist. Timing is another trap: legal completions often take months longer than anticipated, leaving loans maturing before repayment has been achieved.
Refinance risk is equally prevalent. Borrowers often assume that because bridging finance was approved, a mortgage will be straightforward. In reality, long-term lenders have stricter criteria. If stress tests, rental yields, or borrower income don’t align, the refinance can fall apart at the worst possible moment.
From a lender’s perspective, poorly executed exits don’t just affect individual loans; they impact the entire loan book. A single default can tie up capital, trigger enforcement costs, and damage performance metrics with investors. This is why lenders obsess over exit risk. Protecting the stability of their portfolios depends on ensuring that borrowers can and will repay.
For borrowers, the consequences of underestimating exit risk are equally severe. Default interest, forced sales, and reputational damage can wipe out profits or even lead to insolvency. We’ll explore this in detail in our upcoming article: The Cost of a Failed Exit: Penalties, Defaults, and Lost Opportunities.
The most effective way to reduce exit risk is to plan early and conservatively. Developers should benchmark GDVs against multiple comparables and allow for slower sales. Investors relying on refinance should test affordability against current stress tests and assume no improvement in market conditions. International borrowers should prepare documentation well in advance to avoid delays with private banks.
Engaging a specialist broker at the start is also critical. Brokers know which lenders are realistic about sales values, how stress tests are currently being applied, and what alternative options exist if the primary exit falls through. Presenting a lender with this level of preparation instantly reduces perceived risk and increases the chances of approval.
At Willow Private Finance, we see exit planning as the cornerstone of successful property finance. Our role is to anticipate lender concerns, test assumptions rigorously, and structure deals that satisfy both borrower and lender.
In one recent case, a client sought development finance on the basis of optimistic sales values. Lenders pushed back, fearing exit risk. Willow intervened, presenting more conservative comparables, restructuring the facility with a lower LTV, and introducing a refinance fallback. The deal was approved, the project was funded, and the borrower’s credibility with lenders was preserved.
In another, we worked with an international borrower who needed a bridge-to-mortgage exit. By stress-testing the refinance in advance and engaging with private banks early, we demonstrated to the bridge lender that repayment was secure. The facility was agreed at favourable terms because the lender’s exit concerns had been resolved before the application reached credit committee.
This is what lenders really want: confidence that repayment is not just possible, but probable. And this is what Willow delivers.
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About the Author — Wesley Ranger
Wesley Ranger is the Founder and Director of Willow Private Finance. He has worked with both lenders and developers for over 20 years, giving him a unique perspective on why repayment risk dominates credit committee discussions. Wesley regularly structures facilities with robust Plan B exits to reduce default risk and protect borrower credibility.
Important Notice
This article is for information purposes only and does not constitute financial advice. Property finance carries risk, including the risk of default or repossession if loans are not repaid. Exit strategies should be assessed carefully and tailored to individual circumstances. Always seek professional advice before entering into any finance agreement. Willow Private Finance is directly authorised and regulated by the Financial Conduct Authority (FRN: 588422).
