Caveat loan exit strategy: plan how it ends before it starts

Every caveat loan is really two decisions. The first is “can we get the money in time?” The second — the one that decides whether the loan was a good idea — is “how does this get repaid, and when?” Lenders ask the second question early because a caveat loan is short by design. You should ask it first.

What counts as an exit?

An exit is a specific, identifiable event that produces enough money to repay the loan plus its costs. The common ones, ranked roughly from most to least certain:

Exit	Evidence that helps	Watch out for
Sale of the security property, contracts exchanged	Signed contract, settlement date	Purchaser finance falling over, settlement delays
Formal refinance approval	Unconditional approval letter from the new lender	Conditions not yet met, valuation shortfall
Contract or progress payment	Signed contract, invoice, payment schedule	Customer disputes, retention, slow payers
Sale of another asset (property, equipment, a business)	Agency agreement, offers, contract	Market timing, buyer finance
Tax refund or grant	Lodged return, assessment notice	Processing time, offsets against other debts
Business cash flow	Bank statements, forecast, margin history	Seasonal dips, optimistic forecasts
Property sale, not yet listed	Agent appraisal, marketing plan	Time on market, price expectations

The top rows let a lender say yes with confidence. The bottom rows can work, especially with a conservative LVR, but need more supporting evidence and usually a fallback.

How much does the exit need to cover?

More than the loan. The exit must repay:

• the principal;
• any capitalised interest and fees;
• exit costs such as the payout fee and caveat withdrawal; and
• a buffer for a few weeks of delay.

If you’re selling, subtract agent’s commission, marketing and your own legal costs from the sale price first — and the payout on your first mortgage. What’s left is what’s available for the caveat lender. Our costs page shows how to add up the total cost of finance.

How long should the term be?

Longer than your best case. If the refinance approval is “about four weeks away”, don’t take a six-week term; take enough to absorb a valuation query, a lost document and a holiday period. The saving from a shorter term is small compared with the cost of an extension or default.

The Caveat Loan Feasibility Checker builds an exit-plan checklist for the exit you choose. When you’re ready, talk your exit through with a specialist.

What does a strong exit plan look like? An illustrative example

Illustrative only.

A Geelong café group has a $180,000 ATO debt and the ATO is pushing for payment. The owners’ investment unit is under contract, with settlement in nine weeks. They need to clear the tax debt now.

• Primary exit: settlement of the unit sale. Net proceeds after the first mortgage, commission and costs: about $260,000.
• Loan needed: $180,000 to the ATO plus costs.
• Term chosen: four months, leaving roughly seven weeks of buffer after scheduled settlement.
• Fallback: refinance of the owners’ home, where there’s modest equity, if the sale collapses.

That’s a clear, documented exit with room for delay and a fallback. It’s the kind of file that moves quickly.

What if the exit falls over?

Things go wrong: a buyer’s finance fails, a customer pays late, a valuation comes in low. The rules are simple:

1. Tell the lender early. Weeks before the due date, not days after it.
2. Bring a revised plan. A new contract, a new listing, a refinance application.
3. Ask about an extension or refinance. Both cost money but cost less than default.
4. Avoid default if you can. Default brings extra charges, and a lender with a caveat on title will act to protect its position.

Which exits suit which uses?

• Buying property before selling another: see caveat bridging finance.
• Clearing tax debt: see caveat loans for ATO debt.
• Selling the security property to repay: see selling a property with a caveat on title.

Exit checklist by exit type

Use the list that matches your exit. If you can tick most items, your exit is strong.

Sale of property

• Agent appraisal in writing, and a realistic price
• Listing date or signed contract
• Net proceeds calculated after commission, costs and every loan payout
• Settlement date, plus a buffer in the loan term

Refinance

• Application lodged with the new lender
• Approval (ideally unconditional) and a list of remaining conditions
• Valuation ordered or completed
• Latest financials or tax returns ready, if the new lender needs them

Receivable or contract payment

• Signed contract and invoice
• Customer’s usual payment behaviour, not just the stated terms
• Any retention or holdback accounted for
• A fallback if the payment is disputed or delayed

Business cash flow

• Recent business bank statements
• A monthly forecast showing surplus building to the repayment
• Seasonal dips accounted for
• A second exit, especially for larger amounts

The Feasibility Checker generates a checklist like this for the exit you select.

Got a deadline and a way out? Let’s check it

If you can name how the loan gets repaid and roughly when, you’re most of the way to a decision.

The enquiry takes about 60 seconds and involves no credit check. We keep your details in-house rather than sending them to a queue of lenders, and a specialist will call to test the exit with you. Please be precise about the exit date and amount — that’s the part of the form that shapes everything else.

Test your exit with a specialist →