Take-out financing

Take-out financing is longer-term, usually lower-cost debt arranged to repay — or ‘take out’ — short-term funding such as a construction loan or bridge facility once an asset is built, stabilised or otherwise de-risked. The committed or anticipated take-out is often the planned exit that makes the original short-term facility bankable.

Standard in real estate development and bridge-to-term financings.

Take-out financing is a form of refinancing planned from the outset: longer-term, usually lower-cost debt arranged to repay short-term funding such as a construction loan or bridge facility once the asset is built or stabilised. Refinancing is the broader term for replacing any existing debt with new debt.

When short-term funding such as a construction loan or bridge facility approaches maturity and the asset is built, stabilised or otherwise de-risked. In practice the take-out is planned before the short-term loan is drawn, because a credible exit is what makes the bridge or construction facility bankable.