Development Exit Finance
Once a development is built, or close to it, the construction risk your original lender priced for has largely disappeared – yet many developers keep paying development finance rates until every unit sells. Development exit finance switches you onto cheaper terms the moment that risk genuinely reduces.
What Development Exit Finance Actually Is
Development exit finance is short-term finance used to repay an existing development loan once a project has reached practical completion, or is very close to it. It doesn’t fund the original build – that’s what your development finance was for – it simply replaces that facility with cheaper borrowing once the building itself is finished and the main risk has shifted from construction to sale.
Why It’s Genuinely Cheaper Than Your Original Development Loan
Development finance is priced to reflect construction risk – the possibility of delays, cost overruns, or the build simply not completing as planned. Once your scheme is wind and watertight or practically complete, that risk has largely gone, and lenders price development exit finance against the completed asset’s value instead, which is why rates are typically meaningfully lower than your original development facility.
How Complete Your Project Needs to Be
Most lenders expect a project to be at practical completion, or genuinely close to it – commonly cited as 85-90% complete – before development exit finance becomes available. It’s not a route to fund unfinished construction; it specifically bridges the period from substantial completion through to sale or refinance.
Loan-to-Value
For mainstream residential schemes, development exit finance is typically available up to 70-75% of the completed scheme’s value. Commercial and mixed-use schemes are generally assessed a little more conservatively, often in the region of 60-65%, reflecting the typically less liquid disposal market for commercial property.
How Repayment Works
Most development exit facilities don’t require monthly repayments – interest is calculated daily or monthly and added to the loan, with sales proceeds from each completed unit going to the lender until the facility is repaid in full. Many lenders also allow early repayment without exit fees, meaning you only pay interest for the period you actually use.
Why Developers Use This Route
There are three genuinely common reasons: reducing interest costs by switching off an expensive development loan once construction risk has fallen away; buying additional time to sell units at full market value rather than being forced into discounted sales as an original loan deadline approaches; and releasing capital from a nearly complete scheme to start a new project while sales on the current one are still ongoing.
Raising Additional Funds, Not Just Refinancing
Beyond simply repaying your existing lender, development exit finance can sometimes also release additional capital based on the scheme’s new, higher completed value – useful if you’re close to finished but need a final tranche to complete interior works, fixtures, or landscaping before marketing the property properly.
Build-to-Rent Exits
Where your exit strategy is letting rather than selling, development exit finance can bridge the period between practical completion and stabilised letting, commonly six to twelve months, with the facility then refinanced onto a long-term commercial or investment mortgage once the scheme is fully let and producing steady rental income. This is a growing niche with improving terms as more specialist lenders enter this specific space.
Experience Requirements
Some lenders prefer developers with a proven track record, commonly two or more successfully completed projects, though this varies by lender and the specifics of your scheme. It’s worth discussing your own experience level openly with your broker, since this genuinely affects which lenders are realistically available.
Loan Sizes and Terms
Development exit finance is available across a wide range, commonly from around £100,000 up to £100 million or more for larger schemes, with terms typically running 3-18 months, occasionally extending to 24 months for larger, phased schemes where units sell sequentially over a longer period.
Documentation You’ll Need
A typical application requires evidence of the works completed, including planning permission and any relevant warranties, details of your existing development lender and their outstanding balance, a current valuation of the completed or near-complete scheme, and evidence of active marketing or sales activity where relevant.
Frequently Asked Questions
How complete does my development need to be for exit finance?
Generally practical completion or very close to it, commonly cited as 85-90% complete – it isn’t a route to fund unfinished construction.
Why is development exit finance cheaper than my original development loan?
Because construction risk has largely disappeared once the scheme is built, so lenders price against the completed asset’s value rather than ongoing build risk.
Can I raise additional funds through development exit finance, or only refinance?
Often both – some facilities also release additional capital based on the scheme’s new, higher value, useful for finishing final works.
Does development exit finance work for build-to-rent schemes?
Yes – it can bridge the period between completion and stabilised letting, before refinancing onto a long-term investment mortgage.
Do I need previous development experience to qualify?
Some lenders prefer a track record of completed projects, though this varies considerably – worth discussing your specific experience with your broker.
Get in touch with details of your scheme and its current stage of completion, and we’ll help you find a lender genuinely equipped to structure the right exit facility.
