Development finance is designed to fund construction, and it is often priced to encourage repayment soon after practical completion. If units take longer to sell than planned, a developer can face rising costs on the original facility. Development exit finance is a short-term loan that refinances the completed scheme so the units can be sold in an orderly way.
In short: Development exit finance repays the original development loan once a scheme is complete or nearly complete. It gives the developer time to sell or let the units, and may release some equity for the next project. It is repaid from unit sales or a longer-term refinance.
When is development exit finance used?
- The development loan term is ending and some units are unsold.
- Sales are progressing more slowly than forecast.
- The developer wants to release capital tied up in the finished scheme.
- The developer plans to retain some units for letting and needs time to arrange term finance.
What do lenders assess?
The lender looks at the completed value of the units, evidence of completion such as building control sign-off and warranties, sales progress and agent pricing, and the expected time to sell. Because the construction risk has passed, the assessment centres on value and saleability rather than on building costs.
How does it differ from a standard bridge?
Development exit finance is a type of bridging loan focused on new-build or converted units. It is usually secured over several units, with each sale reducing the balance. For context on bridging across the project cycle, see bridging finance for developers and change of use bridging finance.
Frequently asked questions
What is development exit finance?
A short-term loan that refinances a completed or nearly completed development so the developer can sell or let units without pressure from the original development loan.
When should a developer consider exit finance?
Typically when the development loan term is ending, sales are slower than planned, or the developer wants to release capital for the next project.
Do all units need to be finished?
Lenders usually expect practical completion or close to it, with building control sign-off and warranties in place or imminent.
How is development exit finance repaid?
Usually from the proceeds of unit sales, or by refinancing retained units onto longer-term investment finance.
Important information
Ponte Finance PLC is a private lender, not a bank, and is not authorised or regulated by the Financial Conduct Authority. Lending is for business purposes only and is not available to consumers or for property occupied, or to be occupied, by the borrower or a family member as a home. All loans are secured against property, and the property may be repossessed if repayments are not maintained. This article is for general information only and reflects publicly available data at the date of publication. It does not constitute an offer of finance, a forecast, or financial, investment, tax or legal advice. Ponte Finance PLC is registered in England and Wales, company number 15859004, registered office 225 Clapham Road, London SW9 9BE.