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Why Use Development Exit Finance?

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.

Getting the Best Deal on Development Exit Finance

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.

Types of Development Finance

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:

ground up build development finance

Ground up builds

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.

property conversion or restoration finance

Large scale restoration and property conversions

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.

property refurbishment finance

Property refurbishment

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.

bridging loan property development

Bridging loan for property development

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.

How is Development Finance Repaid?

Development finance loans are typically paid in one of the following three ways:

Paid in full

the total loan amount is paid in full, using the profits, when the project is complete, and the properties have been sold.

refinance with long term loan

Refinancing using a long term loan

this usually happens when the developer wants to keep the development for either personal use or for rental purposes.

development exit finance

Refinancing using a Development Exit Bridging Finance

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.

Frequently Asked Questions

  • Borrow up to 75% LTV the total value of the development
  • Interest rates starting from as little as 0.7% per month
  • Borrow anything from 100,000 GBP and up with no upper-limits
  • Loans are available for limited companies, partnerships and individuals
  • Specialist facilities available for foreign investors and offshore companies
  • Loans are available for all types of commercial and residential developments
  • Rolled up interest and flexible repayment options

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 their fees and commissions from the lender, so there should be nothing to pay your broker as a borrower.
  • 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 is typically required to cover both their own legal costs and those of the lender, outlined and agreed early on in the application.

Development Finance Products

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