Development exit finance is a short-term loan that provides funding against a residential development project that’s complete or nearing completion.
You can read about the practicalities of development exit finance here. In this article, we’ll focus on the benefits of using this type of finance.
Development exit finance can be used to repay the original loan that was used to fund the development. This scenario is beneficial when the loan is nearing repayment, but you’re running behind schedule, or you’ve not sold all the properties in the development. It can prevent you from incurring hefty fees or having to sell units under market value to secure quick sales.
If your existing project is not fully complete or sold, development exit finance can release cash to enable you to start on the next project – crucial to avoid missed opportunities.
The interest rates on development exit finance loans are usually lower than those on development loans. Once a development is complete or near finished, the risk to the lender is much lower, which is reflected in the interest rate. As you sell properties, you can use the proceeds to reduce the loan amount. Moving from a development loan to development exit finance can reduce your longer-term costs.
We recently helped two clients to realise the benefits of development exit finance:
Example 1: We secured £2 million of development exit finance so our client could repay the original development loan, complete the second phase of his development project and begin work on phase three.
Read the full details here.
Example 2: We secured £1.745 million of development exit finance to enable our client to repay the two original development loans (one from a bank and one from a private company). As the development was complete, the interest rate on the new loan was approximately a third less, resulting in substantial cost savings.
Read the full details here.
For help securing a development exit finance loan, get in touch. At ASC, we’re experts at finding the right finance, and with a network of offices, we have a local director on hand to guide you.
