Development exit finance is a specialist bridging facility used to repay other loans secured against a 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.
Property developers often need specialist financial support to 'bridge' the gap between completing a project and selling it to an appropriate buyer. This gap can last anything from a few weeks to several months, during which a stopgap solution may be needed.
Development exit finance can be applied for either following the completion of a development project or 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.
When looking for development finance it is important to identify the type of project being planned by the developer in order to access the correct funding product. Types of works can include:
New builds nearly always require development finance loans. Once the project is completed, developers may use development exit finance as a more cost effective solution, but this cannot be done before the project is watertight.
for this type of project refurbishment finance is typically the correct type of loan to use, however if the project is larger than the norm, development finance may be a better alternative.
a refurbishment loan, which is a type of bridging finance, is generally used for property renovations. It can be used for various improvements including, installing a new roof, general structural changes, building an extension, refurbishment, and decoration.
Property investors or developers may want to buy property which needs development or completion work still doing and are unable to get funding from their bank. This is a typical scenario when a bridging loan is a suitable alternative.
Development finance loans are typically paid in one of the following three ways:
the total loan amount is paid in full, using the profits, when the project is complete, and the properties have been sold.
this usually happens when the developer wants to keep the development for either personal use or for rental purposes.
this type of short term loan is often used to fund a new development project before the current project is sold. It can also be used to give developers a bit of breathing space to complete minor works and find buyers.
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:
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:
Having access to funds for property development purposes allows borrowers to take on bigger projects than they would usually be in a position to finance.
The purpose of the facility is to provide the developer with additional time to sell their completed development, while keeping costs as low as possible.
Qualifying for finance as a first-time developer can be challenging. This is why it is advised to seek support of an independent broker at the earliest stage.
Our products are suitable for large and small hotel development projects of all types, from repurposing existing properties to building new hotels from scratch.
Joint venture development finance works in a similar way to conventional development finance. However, no deposit needs to be paid and rates are typically higher.
Mezzanine finance, aka mezzanine funding, effectively enables property developers to 'top up' their first-charge development finance facility to access extra funding.
No Personal Guarantee (PG) development loans are effectively a form of unsecured funding for major property development and construction projects.
Whether your goal is to maximise the value of a property you plan to sell or to boost rental income long-term, a refurbishment finance loan could be just the thing.
Senior debt development finance is the primary source of funds in the form of a first-charge loan. It is considered a lower-risk facility on the part of the lender.
Stretched development finance can be the perfect choice for investors and developers looking to stretch their own equity as far as possible with borrowing for up to 90%.
'Light refurbishment' is used for cosmetic upgrades and minor improvements. 'Heavy refurbishment' is used to raise funds for structural improvements.
Commercial property development finance can be used to fund, build or develop a property or be used to expand your current business property or space.