The Exit Factor

It's that time of year again, the X factor extravaganza, thousands of hopefuls with stars in their eyes and ambitions of becoming the next big pop star....

It’s that time of year again, the X factor extravaganza, thousands of hopefuls with stars in their eyes and ambitions of becoming the next big pop star, but most just end up making a fool out of themselves which I think is the best part of the program. I’m sure you’re all familiar with the show but here’s a quick overview;

To further their musical career in the hopes of making the big time contestants must pass the first hurdle at which many fall in hysterical fashion - the dreaded first audition. The contestant is taken though by Dermot O’Leary - the presenter, who talks to them, makes sure they are ready and gives them a little advice and a pep talk. Then its over to a panel of four harsh critics headed by the iron faced Gary Barlow who can rip a contestant to shreds (this is the best part) or make their dreams come true with one sentence.

The Judging panel has a great responsibility, they need recognise potential for future success and if they see it in a contestant they invest in them, with months of time, effort and encouragement in boot camp and the judge’s houses to get them to the live auditions. It is in their best interest and those of the contestants that only those able to succeed are put through. It is only fair to the contestant to tell them the truth about their performance and maybe make some suggestions to improve or whether they should give up all together.

This has some similarities to how a bridging loan works; the customer in need of a loan is the contestant with the dream, the brokers are the Dermot O’Leary’s of the finance industry, giving advice to the customer and introducing them to the lenders (the panel but a lot nicer) who have to help the customer fast track their requirement and also ensure they have an exit strategy to pay back the investment on time.

Before taking out any short term funding for a commercial project, Lenders will require that your clients have a viable repayment strategy to ensure that the loan can be paid in full at the end of the agreement.

With the all too familiar economic downturn traditional banks are taking a long time to carry out the application process and small businesses are turning their backs on banks and looking towards alternative commercial finance, such as short term loans to help them get the funding they need quickly.

With financial solutions such as bridging loans it is essential that customers have a well thought out and realistic exit strategy to their loan and assess the risks involved. For example when relying on the sale of a business or property as an exit strategy they need to be realistic when assessing how long it will take to achieve a sale. Consideration must be made to how long it will take to find a buyer, how long the buyer will take to complete the purchase and that a buyer may pull out at the last minute meaning an alternative solution will need to be considered.

Other examples include buying stock or machinery and the exit strategy can be the client paying back the loan with the enhanced profits that these will bring. Refinancing other loans are a popular use for bridging loans so that clients can have cash flow for other arrangements that they have until the refinancing is complete.

For the market to for fill its full potential, brokers need to remember and understand the importance of having a clearly defined, realistic and plausible exit strategy, gaining an understanding of the customers’ objectives, purpose and affordability. This will ensure your clients have the full “eXit Factor”.

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