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Development Exit Finance

Developer exit finance explained
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Home » Property Development Finance » Development Exit Finance

Development Exit Finance

Developer exit finance explained
Speak to a broker

Development Exit Finance, or Sales Period Funding, can help to lower your borrowing costs by replacing your original development loan with a cheaper alternative.

This is normally available at, or around, practical completion of the project. However, we have also successfully secured terms for developers who are not quite at that stage.

What is Development Exit Finance?

Once your development project is nearing practical completion, or is wind and watertight, you have the opportunity to refinance your original loan with developer exit finance.

By refinancing you can lower your borrowing costs by securing a lower interest rate loan and you may also have access to further funds by borrowing against the current valuation. Once your project is weather proof or largely completed, a major part of the risk taken by the initial lender will have reduced.

Development Exit Finance is a form of bridging loan and so will be for a short term basis only. The term should be structured so that it meets with your expectations for exiting the site via sale or longer term refinance.

To aid cashflow, the developer exit loan can be set up with interest roll up, so that all payments are made at the end of the term.

Moving over to exit finance is a good way of reducing your costs, improving your cashflow and benefiting from additional time to finish or sell your development units.

Who would need Development Exit Finance?

You can use development exit finance to repay any current development loans on a site that has recently been completed or which is mostly completed.

This provides a few benefits to the developer:

TIME

If the initial development finance is near the end of its term there’s quite a lot of pressure on the developer to get units sold to make the repayment. Exit finance grants you a new time period in which you can sell the units for the best price with less time pressure to deal with.

EQUITY

Exit finance can allow you to pull out some equity so that you can quickly progress to the next project.

COST

Exit finance will be cheaper than your original finance so there’s a significant saving in interest costs. For a lender the level of risk decreases as the project nears completion, so for sales period finance an incoming lender can afford to be more competitive.

Exit Finance setup fees

The primary cost will be the interest charged on the amount borrowed. But there are also number of fees and costs for setting up the new facility. 

The main ones are:

LENDER ARRANGEMENT FEE

Most development finance lenders will charge 1-2% of the loan amount as a setup fee. In most cases this can be added to the amount borrowed and then paid on full redemption of the loan. This will increase the overall cost of your interest but helps with cashflow.

VALUATION FEES

The lender will want a surveyor to visit the site to understand the current position and to provide a valuation as the site is now plus one when fully finished. The cost of the valuation will be confirmed on application and is needed upfront.

LEGAL FEES

As this will be a secured loan facility, a solicitor will be needed to register the lender’s interest etc. Often you will be required to pay for the lenders costs as well as your own.

BROKER FEE

Our brokers do charge a fee for researching and arranging development exit finance. They will confirm this fee to you prior to any application.

EXIT FEES

Where possible we will arrange finance without a lenders exit fee. This will allow you to repay the loan early.

Secured lending always relies on the loan to value (LTV) factor. Exit finance is no different and so the lower the LTV the better rates we can achieve for you. The LTV and your exit strategy will determine the rate of interest charged.

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Ready to discuss Exit Finance? Our brokers are waiting to take your call.

CALL 020 8301 7930

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Who can apply for Development Exit Finance?

The lenders that offer exit finance will accept applications from all types of borrowers including:

It is also possible to obtain developer exit finance even if you are a first time developer.

All credit profiles can be considered, so please give us a call even if you have some poor credit.

 

What information is needed for the application?

Our brokers will let you know what information is needed for the finance application once they have discussed your project with you.

Typically the information below will be needed:

  • Full details of the security
  • Details of the project owner
  • Details of the project borrower
  • Marketing plan
  • Details of reservations and sales etc
  • Planning permission
  • Current development loan information
  • Schedule of remaining works

The incoming lender will want to value the site. If it is only part completed then they will use the Gross Development Value less the cost of any remaining works and profit.

BASIC CRITERIA

  • First charge lending
  • 75% LTV
  • Poor credit considered
  • Corporate or individuals
  • Flexible underwriting
  • Rolled up interest

SUITABLE PROPERTIES

  • Residential properties
  • Flats
  • Houses in Multiple Occupation (HMO)
  • Mixed-commercial properties

Why use a broker?

Our expert brokers are available to help you secure a great deal for your development exit finance. Years of experience and expertise allows us to efficiently locate the best solutions while allowing you to finish a successful development.

We save you time and money.

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Speak to an expert about DEVELOPMENT LOANS

We can provide expert guidance and solutions for property development and bridging. With over 20 years experience we are well placed to assist property developers.

Call 020 8301 7930 to start your journey with us.

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