Development Exit Finance

Development Exit Finance

What is development exit finance?

Development exit finance (DEF) is a type of bridging loan (or bridging finance) for property developers used at the practical completion stage of their project. The aim being to save costs and hopefully maximise their profit.

This is because it works by repaying the existing development finance with a cheaper bridging finance exit loan.

Read on to discover how DEF could be advantageous to your project.

Your guide to development exit finance with Assetz Capital

Development finance, as the name suggests, provides property developers with the funding they need to turn their property vision into a reality.

This could be a ‘ground up project’ – building a brand new development on land – such as new houses, a care home or student accommodation known as Purpose Built Student Accommodation (PBSA).

Or perhaps the property developer is buying an existing property, such as an office block and converting it into apartments.

Whatever the need for the development finance, it will always have an agreed end date with the lender and at Assetz Capital, our term is up to 36 months. In the world of property development, a lot can happen in 36 months and there are many different scenarios in which the developer may want (or need) to ‘exit’ their existing development finance deal.

If the project is over running and won’t complete by the agreed term.

At Assetz Capital, we can work with the client to review the term of their current development finance deal, giving them breathing space and time to finish and sell the development. This is one of the advantages of working with an expert, property finance specialist like Assetz Capital.

If the developer is keeping the project.

If the development is completing on time (or even early) and the developer is planning to retain it, at Assetz Capital we can work alongside them to exit to a commercial mortgage if this is possible and in their financial interest to do so. We’ll look to do this before the current development finance term ends.

If the development is selling well and near completion.

In the scenario where the project is on time, near to completion and selling well, the developer could exit their existing development finance deal early and take advantage of bridging finance. Bridging finance can offer lower interest rates and the ability to switch will depend upon the LTV required.

At Assetz Capital we can even help developers fund their conversion projects before they have planning permission in place! Our innovative Planning Assistance Loan  (PAL) enables them to buy property while they finalise the permissions they need for conversion. Please note that our PAL is available in England only.

What is development exit finance?

Development exit finance is a type of bridging loan (or bridging finance) for property developers used at the practical completion stage of their project to save costs and hopefully maximise their profit.

How does development exit finance work?

Development exit finance works by repaying the existing development finance with a cheaper bridging finance exit loan.

Repaying existing finance usually means you stop accruing interest immediately on your previous loan, as development loans typically accrue interest every month.

What are the benefits of development exit finance?

There are several benefits, including –

• Speed of funding – which can be arranged in matter of days depending upon the complexity of the project. If Assetz Capital already hold security on the asset this could speed up the legal process too.
• Reduced costs immediately your development finance is repaid, as bridging finance interest rates are typically lower.
• More time to complete the sale of the remaining unsold units.
• No immediate need to reduce sale prices given the additional funding period.
• Raising additional funds to further market your unsold units.
• Realising the capital from your ‘at completion’ development to invest into your next project immediately.