Development Finance Refinance for a Part-Complete Development

Positive Commercial Finance specialises in arranging Development Finance Refinance for developers who need to replace an existing lender during a live project. In this case study, we helped an experienced developer refinance a part-complete scheme after their original lender experienced liquidity issues, ensuring construction could continue with confidence.

The Background

Our client was part-way through a residential development when problems began to emerge with their existing peer-to-peer lender.

Loan drawdowns became increasingly delayed, making it difficult to maintain the planned construction programme.

Fortunately, the developer recognised the warning signs early. Although the final drawdown was received, the delays reduced confidence in the lender and made it clear that an alternative funding solution was needed before the situation worsened.

The Funding Challenge

Refinancing a development that is already under construction presents unique challenges.

One of the biggest hurdles is establishing a Day 1 value that is high enough to repay the outgoing lender while still fitting within the new lender’s funding criteria.

A standard valuation can sometimes underestimate the value of a part-complete development, making refinancing more difficult.

In this case, we needed a lender willing to take a commercial view of both the project and the developer’s proven track record.

Our Solution

Positive Commercial Finance introduced the client to an experienced Development Finance lender with a pragmatic underwriting approach.

Rather than relying on a third-party valuation, the lender carried out its own assessment of the site’s Day 1 value. This provided greater confidence in the project’s current position and future potential.

The lender also recognised that the Day 1 advance would temporarily exceed its usual loan-to-value limits. However, they were comfortable doing so because they believed the experienced developer would add value quickly as construction progressed.

To keep the refinance moving, the existing quantity surveyor remained on the project, removing the need to appoint a replacement and helping avoid unnecessary delays.

As a result, the entire refinance completed in just four weeks, allowing construction to continue with minimal disruption.

Deal Structure

• Day 1 Loan to Value (LTV): 78%
• Loan to Gross Development Value (LTGDV): 66%
• Interest Rate: 0.89% per month
• Arrangement Fee: 2%
• Exit Fee: 1% of the facility amount
• Term: 12 months

The Result

The client successfully refinanced onto a new Development Finance facility before their original lender’s difficulties affected the project further.

By replacing the lender quickly, the developer maintained progress on site, avoided extended funding delays and continued building with confidence.

This case study demonstrates how Development Finance Refinance can provide a practical solution when an existing lender is unable to support a project through to completion.