Development exit finance is a specialist bridging facility used to repay other loans secured against development at the time of its completion. Also known as sales period finance, development exit finance is typically offered at a lower rate of interest than a conventional development finance loan.
The purpose of the facility is to provide the developer with additional time to sell their completed development while keeping borrowing costs as low as possible.
Whether you are facing an unexpected delay in selling your development or simply holding out to ensure it sells for the best possible price, development exit finance could be the perfect tool for the job.
Get the best deal on development exit finance
Property developers frequently require specialised financial assistance to ‘bridge’ the gap between finishing a property and selling it to a suitable buyer. This void might last anywhere from a few weeks to many months, during which time a temporary remedy may be required.
Development exit finance can be applied either following the completion of a development project or when the project is approaching completion. This way, the applicant’s original development finance loan can be repaid in full and on time.
The facility is issued at a lower rate of interest than a typical development finance loan, giving the developer much-needed breathing room until the development is sold.
Acting early holds the key to getting the best deal on development exit finance, with the help and support of an experienced broker to negotiate on your behalf.
Frequently asked questions
The main benefit of development exit finance is the way in which it enables developers to save significant sums of money on the potentially high rates attached to an initial development finance loan.
Specifically, there are three instances in which development exit finance can be a useful facility:
- When the borrower’s current development finance loan term is coming to an end, which cannot be repaid as planned due to the development having not yet been sold.
- Towards the end of a development project as a more affordable alternative to a standard development finance loan, used to repay the original development loan early.
- To release capital from a development prior to it being sold, enabling the developer to get started on their next project without costly delays or disruptions.
- In all instances, development exit finance is more affordable than development finance as it is considered a lower-risk facility. As the project is either completed or close to completion, the lender is taking a significantly lower risk by lending capital to the project’s main investor.
Fees and charges vary significantly from one lender to the next, highlighting the importance of enlisting broker support to conduct a full market comparison.
Typical charges that apply when taking out a development exit finance loan include the following:
- Lender arrangement fee: an initial arrangement or administration fee of anything from 0% to 2% of the total loan amount.
- Broker fees: most brokers collect a fee of anything from 0% to 2% of the total loan amount.
- Lender exit fee: a completion fee payable at the time the loan is repaid, which again can be anything from 0% to 1%/2% of the total value of the loan.
- Valuation fees: your lender will require a full valuation of the development to be conducted at your expense, usually for a fixed fee outlined during the application process.
- Legal fees: the borrowers are typically required to cover both their own legal costs and those of the lender, outlined and agreed early on in the application.