Quick answer
Every fast lender asks two questions: what is the money for, and how will it be repaid? A clear purpose names the bill, asset or opportunity, the amount and the deadline. A believable exit plan explains where the repayment comes from — trading income, a property sale, a refinance to a bank, a debtor paying or a contract completing — and when. Writing both in a few sentences before you enquire removes the most common source of back-and-forth.
Key points
- Purpose: what, how much, by when, and proof (a bill, quote or contract).
- Exit: where repayment comes from and when — be specific.
- Short-term loans live or die on the exit plan.
- A plan B for the exit makes a lender more comfortable.
- Purpose
- Business only, with evidence
- Exit
- Source + timing + back-up
- Length
- A few sentences is enough
Most loan applications that stall don’t stall because the numbers are bad. They stall because the assessor can’t quite see what the money is for, or how it will come back. Those are the two questions under every lending decision. Answer them clearly before you’re asked and a fast lender can spend its time on the decision instead of on clarifying emails.
What makes a good loan purpose?
A good purpose answers four things:
- What — the bill, asset or opportunity.
- How much — the exact amount, plus any costs.
- By when — the real deadline.
- Proof — a document that confirms it.
| Weak purpose | Strong purpose |
|---|---|
| “Working capital” | “$65,000 to pay three suppliers whose accounts are due on the 20th; statements attached” |
| “Tax” | “$48,000 to clear an overdue GST balance; myIR summary attached; arrangement to be closed” |
| “Equipment” | “$120,000 for a replacement excavator; dealer quote attached; old machine failed last week” |
| “Growth” | “$90,000 to fund materials and labour for a signed $260,000 contract starting on the 3rd” |
A strong purpose also helps the lender choose the right product. A supplier bill with a 30-day horizon suits something different from an asset that will earn for five years.
What makes a believable exit plan?
The exit is how the loan will be repaid. For short-term and bridging loans it’s the heart of the decision. A believable exit is:
- specific — names the source of repayment;
- timed — says when;
- evidenced — backed by a document or track record;
- backed up — has a plan B.
Common exits include:
- Trading income — repayments from normal cash flow over the term.
- A customer paying — a large invoice or retention due on a known date.
- A property sale — a property under contract, or being marketed.
- Refinance — moving to a bank loan once accounts are finalised or a valuation is done.
- A contract completing — progress payments as a job is delivered.
How do I write it down quickly?
Use this template:
We need [amount] by [date] to [purpose]. Evidence: [document]. We will repay it from [source] by [date], shown by [evidence]. If that is delayed, we will [plan B].
That’s it. Three or four sentences. Paste it into the enquiry’s notes field or read it out on the first call. If you’d rather talk it through, start an enquiry and the specialist will help you shape it.
Why do short-term lenders care so much about the exit?
Short-term, bridging and caveat-style loans are designed to be repaid in months, not years. If the exit fails, the loan doesn’t simply roll on — it has to be dealt with. So a lender will test:
- Is the property sale realistic at that price, in that market, in that time?
- Will the bank really refinance, and what does it need first?
- Is the customer who owes the invoice reliable?
Our pages on short-term business loans and bridging finance go deeper.
What if my exit isn’t certain?
Few exits are certain. That’s why a plan B matters. If the property sale is slow, could you refinance? If the customer pays late, could you extend? Showing you’ve thought about it reassures a lender far more than pretending the risk doesn’t exist.
Does the purpose affect how fast the loan moves?
Yes. A clear purpose with evidence lets the assessor skip a round of questions. Some purposes also allow funds to be paid directly — to Inland Revenue, a supplier or an existing lender — which can make the decision simpler. Inland Revenue, for instance, lets businesses set up arrangements in myIR, and paying a balance out in full ends that arrangement.
What exit plans make lenders nervous?
Some exits come up often and tend to slow decisions down. Knowing them helps you strengthen your plan before you present it.
- “Business will pick up.” Possibly true, but not specific. Show the orders, contracts or seasonal history that prove it.
- “We’ll refinance with the bank later.” Fine if the bank has indicated it will. Less convincing if the bank has just declined you.
- “We’ll sell the property” with no agent, appraisal or timeline. Add an appraisal and a realistic marketing plan.
- “A big customer owes us” when that customer is already months overdue. Explain why payment will now happen.
- Exits that depend on another loan. Borrowing to repay borrowing needs a very clear end point.
None of these rule a loan out. They simply need more evidence. Adding one document — an agent’s appraisal, a bank’s email, a signed contract — often turns a nervous exit into a believable one.
Illustrative example: a contractor’s exit
Illustrative only. A Taranaki engineering contractor needs $150,000 to start a signed project before the first progress claim is paid. Purpose: materials and labour for the first six weeks, contract attached. Exit: the first two progress claims, due in weeks six and ten, payment terms in the contract. Plan B: a second-mortgage refinance on the owner’s workshop. The assessor can see the whole story in a paragraph, and the decision comes quickly.
Know your purpose and exit? You’re ready.
If you can explain what the money is for and how it comes back, you’ve answered the hardest questions already. Send a short enquiry — it takes about a minute, there’s no credit check when you first enquire, and your details stay with us rather than being sold on. A real person will call to confirm the plan. Please make your answers as accurate as you can; it’s what lets us move quickly.
Frequently asked questions
What is an exit strategy in business lending?
It's how the loan will be repaid at the end of its term — for example from trading income, the sale of a property, refinancing to a bank, or a large customer payment. Short-term lenders focus heavily on it.
Can one loan cover several purposes?
Yes, as long as they're all business purposes. List each one with its amount so the total makes sense.
What if my exit depends on a property sale?
That's common for short-term and caveat-style loans. Be realistic about the sale timeframe and price, and say what happens if the sale takes longer.
Do I need a formal business plan?
Not for most fast loans. A few clear sentences, backed by documents such as invoices, quotes or a sale agreement, are usually enough.
Can the purpose be refinancing other debt?
Yes. Paying out expensive business debt or IRD arrears is a common purpose. Include the payout figures.