Development exit finance takes out a development loan once the scheme reaches practical completion, giving you a cheaper facility and a longer window to sell the units properly.
Development finance is priced for build risk. Once the building is up, that risk has gone, but the facility is still charging for it and the redemption date is still coming. Development exit finance resets both. In many cases it also releases some of the profit locked in the scheme so you can start the next one.
On this page
Apply Now or Call 0161 5469128
What development exit finance is
It is a short-term loan secured against a finished or substantially finished development, used to repay the development lender. The new facility runs long enough to sell the units at proper value rather than at a forced-sale price, and it is repaid from those sales or from a refinance onto term debt.
Structurally it is a bridging product. Interest only, first charge, no monthly capital repayment, and underwritten against the asset and the exit rather than against trading income.
When to use it
- The development facility is running out of term. The build finished, the units have not all sold, and the redemption date is close. This is the most common trigger.
- You want to stop paying development rates on a finished building. Every month at the higher rate comes straight off the profit.
- You need your equity back to start the next site. Waiting for the last unit to sell can hold up a whole pipeline.
- The sales market has slowed. A longer facility protects the price you achieve rather than forcing a discount to hit a deadline.
- Your lender has withdrawn or will not extend. A new lender takes out the old one, which is sometimes called a re-bridge.
- The scheme is nearly finished, not fully finished. Some lenders will fund from a defined point before practical completion where only snagging or external works remain.
Start this three months before your redemption date
Development exit is not an emergency product, although it is often used as one. A lender taking out another lender needs a valuation, legals and a redemption statement. Arranging it while you still have time is straightforward. Arranging it with three weeks left is where the pricing gets worse and the options narrow.
Why it costs less than development finance
Development lending prices risks that disappear the day the building is finished.
| Risk | During the build | After practical completion |
|---|---|---|
| Build cost overrun | Live risk, priced in and monitored | Gone, costs are known |
| Programme delay | Live risk, affects the whole facility | Gone |
| Contractor failure | A material risk to the lender | Gone |
| Security value | A part built site is difficult to sell | A finished, saleable building |
| Monitoring cost | Surveyor inspects and certifies each drawdown | No longer required |
What is left is sales risk, which is a narrower proposition, and the pricing reflects that.
Practical completion, and what lenders actually want
Practical completion is the point at which the works are finished apart from minor snagging and the building can be occupied. It is certified by the contract administrator or architect.
That certificate is not the only document a lender will ask for, and this is where timetables slip. Expect to provide:
- Practical completion certificate
- Building control final certificate or completion certificate
- New build structural warranty, where the units are new build
- Energy performance certificates for each unit
- Redemption statement from the existing lender
- Sales evidence, whether reservations, exchanges or a current agent appraisal
Building control sign off frequently lags practical completion by several weeks. If your redemption date is tight, tell us early, because a handful of lenders will proceed on an undertaking where the outstanding items are administrative rather than physical.
Releasing equity for the next site
This is the part developers underuse. A development facility is sized against cost and against gross development value during the build. Once the scheme is finished and valued as completed units, there is often headroom between the outstanding development debt and what a lender will now advance.
Exit finance can be drawn at a level that repays the development lender and releases the difference to you. In practice that means your deposit for the next site comes out of the last one before the final unit has sold, which is what lets a small developer run two schemes instead of one.
Model the numbers before you rely on it. The residual land value calculator works back from end value to what a site is worth, and the development finance drawdown calculator shows what the existing facility is costing you month by month.
Part sold schemes
Most exit cases are part sold rather than fully unsold, and lenders are comfortable with that provided the mechanics are set up properly.
- Part release provisions. The facility should allow individual units to be released from the charge as they complete, against an agreed release figure per unit.
- Release figures above the pro rata share. Lenders normally require a little more than the strict proportion so that the loan de-risks as the scheme sells down.
- Reservations count as evidence. Signed reservations and exchanged contracts strengthen the case materially.
- Retained units are a valid outcome. If you intend to hold some units and let them, say so up front, because the exit for those is a term refinance rather than a sale.
What lenders look at
- Completion status. Fully complete, or close enough that the remaining items are defined and costed.
- Value as built. A fresh valuation of the finished units, not the appraisal figure used at the start of the scheme.
- The sales story. What has sold, at what price, how long the remaining stock has been marketed, and what the agent says about the local market.
- The exit from the exit. Sale of the remaining units, or a term refinance on whatever is retained.
- Title and documentation. Titles split where units are being sold individually, warranties in place, no outstanding planning conditions.
Where units are being sold off individually, the titles usually need splitting first. Our guide to property title split bridging covers how that is funded and sequenced.
Alternatives worth comparing
| Option | When it fits | Trade off |
|---|---|---|
| Extend the existing development facility | A short overrun and a cooperative lender | Extension fee, and you keep paying development pricing on a finished building |
| Development exit finance | Finished scheme, units still to sell, or equity needed for the next site | New valuation and legal costs on the switch |
| Buy to let or portfolio refinance | You are keeping the units and letting them | Slower to arrange, and rental stress testing applies |
| Commercial mortgage | Commercial or mixed use units being retained | Tenant and covenant strength become the driver |
Development exit finance FAQs
Can I get development exit finance before practical completion?
Some lenders will, where the building is watertight and what is left is snagging, landscaping or external finishes. The remaining items need to be defined and costed, and the lender will normally hold a retention against them. A scheme with significant work still to do remains a development finance case, not an exit case.
How much cheaper is it than development finance?
It is consistently priced below the development facility it replaces because the build risk has gone, but the size of the gap depends on the scheme, the loan to value and the quality of the sales evidence. The comparison that matters is total cost over the months you will hold it, including the valuation and legal costs of the switch, against what staying put would cost over the same period.
Can I take money out of the scheme at the same time?
Often yes. If the finished valuation supports a larger facility than the outstanding development debt, the difference can be released to you on completion. Lenders will want to understand what the money is for, and a stated purpose such as the deposit on an identified next site is viewed more favourably than an open ended release.
What if some units are already sold?
That strengthens the case. Exchanged contracts and signed reservations are direct evidence of the exit. The facility is structured with part release provisions so each unit can come off the charge on completion of its sale, against an agreed release figure. Lenders normally set that figure a little above the strict pro rata share so the loan reduces faster than the remaining stock.
My lender will not extend and my term ends soon. Is it too late?
Not necessarily, but the timetable is the constraint rather than the lending decision. A new lender needs a valuation, legal work and a redemption statement from the outgoing lender. Contact us as soon as you know an extension is not coming, because the options are considerably wider at three months than at three weeks.
Is development exit finance regulated?
No. It is business-purpose lending secured against a development scheme, so it sits outside the regulated mortgage regime. That is the type of finance we arrange. We are not authorised or regulated by the Financial Conduct Authority and we do not handle regulated contracts.
Arrange development exit finance
Redemption date approaching?
Send us the outstanding balance, the redemption date, what has sold and the current valuation position. We will come back with terms from the lenders active in development exit, and tell you plainly whether an extension would be cheaper.
Related pages
- Property development finance
- Development finance for commercial property
- Development finance for first time developers
- Property title split bridging
- Bridging loans and bridging finance
Bolton Business Finance Ltd is not authorised or regulated by the Financial Conduct Authority. We arrange non-regulated, business purpose commercial finance only. Any property used as security is at risk if the loan is not repaid.