Background – Setting the scene and the project’s funding needs
Having completed an exclusive development of five detached houses near Truro in Cornwall, our client, a property development duo, required cash input pending sales.
Challenges – Financial pressures and the need for careful negotiation
The developers had funded the construction with a development finance loan we arranged and funding from two trading businesses they also operated. They sought further assistance from us after two of the houses had been sold. They were seeking £850,000 to repay the development loan and £690,000 of working capital to return to the two businesses that had helped finance the project. This scenario is an unusual means of funding a development scheme, so it would need careful and considered negotiation with a suitable lender.
Solution – Securing the right lender and favourable terms
We approached Octane Capital and secured a gross development exit loan of £1.745 million (£1.54 million plus interest). This arrangement enabled the developers to pay off the development loan and gave them the cash to return to the two trading companies.
Outcome – Positive results and reduced costs for the client
More importantly, the interest rate on the development exit loan is approximately one-third less than on the development loan, saving substantial interest costs. Since completing this loan facility, the next house has also been sold, meaning part of the loan has already been repaid.
Our clients have plenty of time to sell the two remaining houses in the development, safe in the knowledge that a flexible and practical lender is looking after them.
Octane was the first lender in the market to react to the August 2024 interest rate drop – phoning us within an hour of this news to confirm a rate reduction with immediate effect on all current facilities, including this one.
Developer exit finance is available for (near) physically completed development schemes where the developer wishes to “cash out” before sales are completed. In this example, the value of an experienced broker can be measured in the practical approach taken by the lender in making a commercial decision to support the application.
At ASC, we only work with tried and trusted lending partners, so you can rely on us to select the right lender for your circumstances.
