Development Exit Finance

Development Exit Finance Explained

This financing option acts similarly to short-term bridging loans, but is typically offered at a lower interest rate than any current development loans you may have. The key advantages involved in this option include extended time to sell your development, cutting costs in comparison to other loan types, and enhanced cash flow at a critical point in your project. You could even get started on your next project before the completion and sale of your current project.

Exit finance can seem cheaper than other forms of development loan because this type of loan is short term and attached to a specific project. Lenders are more likely to offer favourable terms when presented with a well-thought out plan for exit finance. Whereas whole-project financing presents more of a risk to lenders, facilitating an exit from property development has much more security around it for a lender. Repayment is usually due upon the sale of developed property, and depending on the loan amount, you may still be able to retain a portion of proceeds from the sale.

Costs of development exit finance

Rates and fees for development exit loans are created bespoke for each project, as your existing loan, the progress of the project, the plan you present to lenders and next steps affect what your solution is. Mortgage brokers who specialise in commercial loans can advise you on every step of the process, as well as expected rates for your project. Standard fees include:

Your lender’s arrangement or facility fee
Your loan drawdown or admin fee
Redemption fee on your existing loan
Exit fees
Survey or valuation fees – the more complex your project, the more expensive to value
Legal fees
Broker fee

How Much Can I Borrow?

Most development exit loans are capped at 75% LTV, but in special circumstances these can go up to 100% LTV (typically requiring additional security) if necessary and supported by the lender. You will not make monthly payments with this sort of loan, however, and it will be due on the sale of your developed properties.

Why choose Coreco Commercial for exit finance?

Coreco Commercial is an award-winning, professional mortgage brokerage that brings refreshing, down-to-earth clarity to the commercial and specialist lending market and advice process. With a deep understanding of the complexities involved in development exit loans, Coreco stands out for its ability to offer bespoke solutions tailored to your needs. Our expert team, known for their transparent and straightforward approach, ensures a smooth and efficient loan process, giving you the confidence and support needed to complete your project successfully. Choosing Coreco means partnering with a brokerage that not only excels in expertise but also values clear communication and client satisfaction, making Coreco the ideal choice for your development exit loan requirements.

The development exit finance process

We’ve explained the broader process around Development Exit financing, so that you can be prepared for initial consultations with plans for each stage of the process. This is a general structure, so please note that if you need a rushed process, lenders and brokers can arrange this within a short timeframe. Ask your broker for more information on timelines and the process.

Initial Consultation: Engage with Coreco Commercial to discuss your project and financial needs. Provide details about the development, its completion status alongside your refinance or selling strategy

Loan Application: Submit a formal application along with necessary documentation, such as project plans, financial statements, and completion certificates.

Property Valuation: The lender will arrange for an independent valuation of the completed property to assess its current market value.

Due Diligence: The lender conducts a thorough review of your financial history, the development’s viability, and any potential risks.

Loan Offer: If approved, you’ll receive a loan offer detailing the terms, interest rates, and repayment schedule.

Legal and Compliance Checks: Complete any legal requirements, including the review and signing of loan agreements, ensuring all regulatory compliance.

Funds Disbursement: Once all conditions are met, the loan funds are disbursed, allowing you to repay existing development finance and potentially free up capital for future projects.

Exit Finance FAQs

When should I start looking for development exit finance?

As soon as possible! If your property is wind and watertight, and you’re looking to inject some funds into the project to complete, or your loan deadline is looming and you won’t be able to sell before then, start looking for development exit finance. Leave at least a month, if not longer, for the process. Although shorter timelines can be arranged, for guaranteed safety this is Coreco’s recommended gap.
What information would I have to provide?
When applying for a development exit loan, you will need to provide a comprehensive set of documents and information to the lender. This helps them assess the viability of your project and your ability to repay the loan. Here’s a detailed list of the information you’ll typically need to provide:
1. Project Details:
  - Description of the development project, including type (residential, commercial, mixed-use).
  - Current status of the project, including percentage of completion.
  - Timeline for completion and projected completion date.
  - Plans, permits, and approvals from relevant authorities.
2. Financial Information:
  - Detailed cost breakdown of the project, including costs incurred to date and remaining costs to complete.
  - Budget and financial forecasts for the project.
  - Evidence of existing financing arrangements, including current loan agreements and repayment schedules.
  - Sales strategy and any pre-sales agreements if applicable.
3. Valuation and Monitoring Surveyors Reports:
  - Independent valuation report detailing the current value of the part-completed project.
  - Projected final value upon completion.
4. Personal and Business Financials:
  - Personal financial statements of the developer(s).
  - Recent tax returns.
  - Business financial statements, including profit and loss statements, balance sheets, and cash flow statements.
  - Bank statements for the business and personal accounts.
5. Experience and Track Record:
  - Resume or portfolio highlighting previous development projects completed.
  - References or testimonials from previous lenders, investors, or clients.
6. Legal and Compliance Documents:
  - Proof of ownership or legal interest in the development property.
  - Company registration documents (if applying as a business).
  - Insurance details relevant to the project (e.g., construction insurance).
7. Exit Strategy:
  - Detailed plan for repaying the development exit loan, including intended sources of repayment (e.g., sale of completed units, refinance).
  - Market analysis or feasibility study supporting the projected sales or rental income.
8. Additional Supporting Documents:
  - Photographs or progress reports of the development site.
  - Any contracts with contractors, suppliers, or other stakeholders involved in the project.
  - Professional appraisals or surveys conducted on the property.
Providing thorough and accurate documentation helps streamline the loan approval process and demonstrates your preparedness and reliability to the lender.
Will a valuation be required?

Yes, a valuation will be required.
How will my project be valued if it’s part complete?
When your project is part complete, the valuation process for a development exit loan will focus on both the current state of the project and its projected final value. Here’s how it typically works:
1. Site Inspection: A qualified surveyor or valuer will visit the development site to assess the current state of construction. They will review the progress made so far and evaluate the quality of work completed.
2. Review of Plans, Planning Permissions and Warranty Provider: The valuer will examine the project’s architectural plans, building permits, and any other relevant documentation to understand the intended final structure and its specifications.
3. Assessment of Remaining Work: The valuer will estimate the cost and timeline required to complete the remaining work. This includes materials, labour, and any potential issues that could arise during the completion phase.
4. Market Analysis: The valuer will conduct a market analysis to determine the current value of similar completed properties in the area. This helps in estimating the projected final value of your development upon completion.
5. Current Value Calculation: Based on the site’s current state and the percentage of completion, the valuer will calculate the current value of the project. This involves considering the work completed to date and the expected costs to finish the development.
6. Risk Assessment: The valuer will also consider any risks that might affect the project’s completion, such as financial stability, market conditions, or potential delays. This assessment can impact the final valuation.
7. Valuation Report: The valuer will compile all findings into a detailed report, outlining the current value of the part-complete project and the estimated final value upon completion. This report is then provided to the lender to assist in the loan approval process.
The combined assessment of the current progress, any remaining or outstanding work, and market conditions ensures a comprehensive valuation, helping the lender determine the appropriate loan amount for your development exit loan.

Related products

If you’re at a different stage in your development, and want advice on alternative financing options, browse our other pages to read about the other solutions we offer at Coreco.

Bridging Loan

Development Finance