Why use development exit finance?

Rarely does a development project run smoothly from start to finish – so succeeding as a property developer relies on the ability to adapt to changing circumstances.

Even with every step mapped out and simple end goals, there is always the possibility of an unforeseen delay throwing a spanner in the works, which is why having a more flexible exit strategy for your development finance is essential.

Adapting to challenges in the development process is difficult enough without having to worry about how to fulfil your outstanding finance obligations as deadlines draw near. This is where development exit finance can be a crucial tool in tying up loose ends.

Projects that are closer to completion can be refinanced, with exit finance providing further funding that allows developers to switch from previous loans to a more long-term finance solution with a practically seamless transition.

If you are not sure what exactly development exit finance does, read on to discover the advantages of this type of financing and how it could benefit your project.

How could development exit finance help you?

A development exit loan is designed to facilitate the exit of the development stage, so the developer can move on to sell or lease the completed property as intended, and/or move on to the next project without being held up by the previous unfinished development.

Opting to refinance with a developer exit loan offers a variety of benefits – here are the main reasons why developers frequently choose to take out development exit financing:

Access to funds

If a development is almost completed but not ready to go on the market, the developer might have to postpone their next project until the funds from the sale come through, as traditional lenders are often reluctant to approve loans before existing finance is fully repaid.

As an alternative, developer exit finance can provide the much-needed funds to complete the current project, repay outstanding finance, and proceed with the next development without disrupting the individual or company’s financial and commercial continuity.

Reducing risk

Taking out development exit finance can help developers to mitigate the various risks associated with the construction industry by providing a steady funding source, which can act as a buffer that allows them to focus on finishing the project and proceeding to the next one.

As there is a higher level of risk at the start of a new project, development finance costs more, but exit finance helps to pay off the previous loan and switch to a cheaper one – benefitting from a lower interest rate while the final stages of the development are completed.

Adjusting timelines

While having access to necessary funds can help to speed up completion and get the property on the market sooner, development exit finance can also be used to extend the sales period when more time is needed to finish the project to the expected standards.

An exit loan can bridge the span between the end of the original finance term and the date when the property can be sold, giving the developer more control over the marketing and sale of the property, as there is less pressure to rush a sale and settle for a lower price.

Increasing returns

Completing projects to the highest marketable standard, and as closely as possible to the planned budget and schedule, can increase demand and therefore achieve a higher ROI (return on investment). The lower interest rate of a development exit loan also helps to protect profit margins where a development may otherwise become loss-making.

Additionally, development exit finance lenders tend to be more flexible, and can allow developers to keep a percentage of the proceeds from each unit as they are sold – so they can repay in stages until the sale of the last unit, keeping cashflow disruptions to a minimum.

Is developer exit finance right for your project?

This style of ‘finish and exit’ finance provides an alternative route for developers who may find themselves in a tricky position when things do not go as planned – offering benefits such as more time, lower borrowing costs, and flexible repayment options.

If you need to secure additional funding to finish an ongoing development, whether it is residential or commercial, new build or conversion, a development exit loan could meet your needs and help you to bring your development project to a successful conclusion.

To learn more details about how development exit finance can be tailored to your project, talk to the team at ABC+ Architects Certificate today. Call 0161 928 8804, message 07729 647 493 on WhatsApp, or email info@architectscertificate.co.uk and we will get back to you.