Developer exit finance
Developer exit finance
Written by Chris Canham, commercial finance broker with nearly 30 years in financial services. Last reviewed .
Replacing a development facility on a completed scheme, usually at a materially lower rate and with the sales pressure taken off.
What it is
The facility for the gap between practical completion and the last sale.
Development exit finance is usually triggered by one of three things: the scheme has reached practical completion (or is very close to it), the development facility is approaching the end of its term, or units are selling more slowly than the appraisal assumed.
It does two jobs. It replaces a facility priced for build risk with one priced for a finished asset, which usually lowers the monthly cost. And it can release some of the profit tied up in the scheme. In return the lender expects a defined sales period and a clear redemption plan.
It is not always the right answer. If only a few units remain, the incumbent lender will extend on sensible terms and the sales are close, a short extension can be cheaper than the fees on a new facility. We will run both options side by side and tell you which one makes more sense.
Use cases
When developers use it.
Development facility expiring
Term expiry approaching with units unsold and the incumbent lender unwilling to extend on acceptable terms – or extending only with default interest or a heavy fee.
Sales taking longer than forecast
A slower market. Exit finance buys time so you are not pushed into accepting a discounted bulk offer just to clear the debt.
Releasing equity for the next site
Drawing profit out of a finished scheme to fund the deposit and costs on the next acquisition, rather than waiting for the last sale.
Pre-practical completion
Where snagging and sign-offs remain but the scheme is substantially complete and watertight. Some lenders will consider it with a retention for the outstanding work.
Switching to a part-and-part exit
Keeping some units to rent while selling the rest, with the retained units later refinanced onto term finance.
Refinancing an expensive senior and mezzanine stack
Collapsing two facilities, and two sets of interest, into one cheaper first charge.
Indicative terms
What lenders will typically do.
| Measure | Typical position |
|---|---|
| Monthly interest rate | Usually below the development facility it replaces |
| Maximum LTV (of GDV) | Lender-dependent, based on the completed value of unsold units |
| Term length | Short term, sized to a realistic sales period |
| Build status required | At or close to practical completion |
| Arrangement fee | Usually a percentage of the loan, added to the facility |
| Sales release mechanism | Agreed redemption amount per unit sold |
The saving against your existing facility is the number that matters. Run both side by side.
Go deeper
Read alongside development finance.
Exit finance is the second half of the development cycle. Read it alongside our development finance guide, and use the development GDV calculator to model both stages – the build facility and the exit – so you can see the full cost of the scheme before you start, not just the first loan.
Questions
The things people ask first.
Scheme finished and the facility running out of runway?
Send the GDV, the outstanding facility balance and the sales position to date, and you will get an indicative view of the saving.
We aim to respond the same working day.
Or book a 30-minute call at a time that suits you.