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Developer Exit Finance

What is Developer Exit or Development Exit Finance?

Have you finished your development and now need more time to sell or refinance the properties? You are in the right place.

Or perhaps you are part-way through the works and “almost” finished?

Developer Exit Finance, sometimes known as Sales Period Loans or Development Exit Finance can help you refinance your current development loan.

What is Development Exit Finance used for?

You are approaching the end of term with the current lender.
Developers do not want to have to sell their units under pressure, nor do they want to face extension fees with their existing lender. Both can erode profits. A developer exit loan can provide the time needed to market and sell the remaining units. With no exit fees, and interest accruing daily, you can repay the loan as quickly as you wish.

You are unhappy with the current interest rate.
Rates typically range from 0.55% – 0.75% per month with a Developer Exit loan. Developers can often save considerably by switching to a developer exit loan when their sites reach, or are approaching, practical completion.

Positive Commercial Finance recently facilitated a Development Exit Loan for a developer based in the Midlands. The project had over-run and was coming to the end of the development loan term. The Development Finance Lender had extended the term once and was not prepared the extend the term again. Positive Commercial Finance arranged a Developer Exit loan that not only paid off the Senior Lender and Mezzanine Lender, but also released some cash for the developer. We managed to provide a lower interest rate, on a 12 months term to allow plenty of time for sales.

You want to release cash to work on other projects.
We can facilitate significant cash releases to provide funds for other projects. Plus, in some cases, the net sales proceeds from each sale can be shared with the developer, further aiding cash flow as each unit is sold.

Development facilities often allow a short time period for sales. In many cases, they do not quite allow long enough. Once the “out of the ground” construction risk is gone, and works have progressed significantly, it is possible to refinance, which can very often come at a lower cost than the original development facility. These facilities then give you a longer marketing and sales period, to enable you to sell the properties without any time pressures, at prices you are more willing to accept. They can afford the developer more control over the sales process, taking away the stress of worrying about redeeming a Development Finance facility on time.

If works are not yet 100% complete, then further monies can also be made available in arrears, in the same way as a development facility would.

Lenders understand that a well progressed or completed development has less risk.

Interest can be retained or rolled-up and paid on redemption, so there are no monthly payments throughout the course of the loan, nor are there any exit penalties.

There is often no set fee/ costs structure with these loans, so we can work with you to create a bespoke loan that suits your requirements. Lenders can be flexible on fees, terms and the way in which interest is repaid.

Sales Period Finance is available on Residential and Commercial Developments in England, Scotland, Wales and Northern Ireland. Options are available for all types of company structures including SPVs, Offshore companies, UK Limited Companies etc.

What are the Key Features of Development Exit Finance?

Up to 80 LTV%

Arrangement Fees from 1% on developer exit products

Interest Rates from 0.4% per month

No exit fees or Early Repayment Charges (ERC’s)

No Up Front Fees

Up to 36 months with development exit loans

Available in England, Scotland, Wales and Northern Ireland

Facilities for first time developers are available

Option to retain part of your proceeds from every unit sold

Adverse Credit cases can be funded

Fast completions possible with exit finance

Interest can be rolled up, retained or paid monthly.

What are the Criteria for a Sales Period or Development Exit Loan?

The development will have to be built in accordance with its own planning permission and building regulations.

On completion the Development will have a suitable New Build Warranty

A First legal charge will be required on the development property

Multi-unit development schemes preferred

 

What information would I need to provide for Development Exit Finance?

What Company (or name) is the project held in?

A link to the selling agents Sales Particulars, or brochure.

Planning permission details.

If the development is finished, Practical Completion certificates.

It the development is not finished, a summary of works outstanding, and costs thereof.

Details of the New Home Warranties, if applicable.

Amount of debt against the site currently.

 

Developer Exit Loan Frequently Asked Questions:

How much can I borrow using a Development Exit Loan?

A Development Exit facility can provide up to 80% of the value of your project. There is no upper limit in terms of a loan amount. Loans from £100,000 to over £50m are readily available.

How much will a Sales Period Loan cost?

The cost will be determined by the Loan to Value (i.e. the loan amount as a percentage of the property value), the loan size, the development itself (how many units there are, and where it is located), and the applicants credit profile in some instances.

An arrangement fee will be charged, in addition to the monthly interest rate. You will be expected to cover the cost of a valuation report, in addition to legal fees.

How long does a Development Exit Financeloan take to complete or draw down?

Typically between 7 and 14 days, but the quickest yet has been 48 hours, where there was a valuation report already in place, and with an extremely motivated borrower and solicitors.

What is a Finish and Exit Loan?

A Finish and Exit loan is used when a development is nearing the end of build works, but not quite finished. The original development loan was probably not quite long enough, or the project had been faced some project, meaning the development loan had timed out. In this instance, the incoming funder would repay the existing development funder and advance further funds (usually in arrears) to finish the development.

Will my project have to be practically complete?

No. We have products that will fund the final part of the build, plus then sales period.

Can I keep some of the sales monies?

Yes. We have options where part of the net sales proceeds can be retained by the developer, for cash flow purposed or to invest elsewhere.

Can I pay back my Development loan early?

Yes, you can. Some Development Facilities come with Exit Fees though, which are charged when you repay a loan, so you will need to check your existing arrangements and request a redemption statement from your lender.

Can I extend a Development Finance loan?

That would be at the discretion of the development finance lender. Generally, if your conduct throughout the loan has been acceptable, and the development lender can see that you would benefit from a short extension for a few months, then they might consider it. However, if you need a longer period to sell the properties, then it makes more sense to refinance to a Developer Exit loan, which would give you 12 months, and often at a cheaper cost than a loan extension.

Is there a loan available to finish off my development?

Yes. The most appropriate type of loan would depend on the extent of works left to carry out.

How is a part-complete development valued?

Some valuers will consider the original site value plus “work in progress”/ works done to date, whereas others will work backwards from the Gross Development Value, and deduct the cost of works outstanding and developers profit.

When is a development classed as “finished”?

A scheme is usually classed as finished when you have Practical Completion certificates.

What is a Sales Period loan?

This is a short-term loan which can give a developer more time to arrange the sale of the properties.

What happens if the houses do not sell?

If you have taken a Developer Exit loan and the properties have still not sold at the end of the term, you could consider refinancing to a longer-term holding position, but that would require that the properties are (or will be) tenanted and income producing, so a longer term mortgage can be serviced (interest paid monthly).

What is a Practical Completion certificate?

When all building work is completed (except for minor snagging).

How is a Developer Exit loan paid back? 

The lender would take the net sales proceeds from each sale, until their loan plus any fees and interest is repaid. Often a lender can allow the developer to retain some of the net sales proceeds, provided the Loan to Value position doesn’t increase.

Can I get a Developer Sales loan if I have bad credit?

Yes, but expect the interest rate to be increased to reflect the lenders enhanced “risk”. As property sales is the exit strategy, adverse credit applications can be considered on the various developer exit products available.

How can I repay my property developer finance loan if the last few houses haven’t sold?

This is exactly what a developer exit product is for! We can arrange a facility that will repay your development finance loan and give you more time to sell the last few houses – if you are asking this question you need to instruct the development exit broker, Positive Commercial Finance! Refinancing your development loan could not be easier.

How do I apply?

Contact us now! info@positivecommercialfinance.co.uk or call us on 0161 763 0321.

If you want a fast, flexible and reliable service, try
Positive Commercial Finance.

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