Why Developer Exit Loans Is Important
Embarking on a development project can be an exhilarating and fulfilling experience. However, the development world has its risks and financial hurdles. Property development projects can be a rollercoaster ride, 
even for experienced developers. Unexpected setbacks, rising costs, and unforeseen circumstances can create economic challenges that threaten the completion of a project and put developers at risk of financial losses. Developer exit loans can help save the project and mitigate financial difficulties.
If you’re a property developer, you know that projects can be unpredictable, even with years of experience. Unexpected setbacks can make completing a project on time and repaying your initial loan challenging. Lenders may not be able to offer extensions or forbearance, leaving you short of funds to finish the project. There’s a solution to such situations called developer exit finance.
A summary of development exit loan
A development exit loan is a form of bridging finance designed to support developers as their project nears completion. It replaces the existing development finance, reducing finance costs and providing additional equity to improve cash flow or fund future projects.
This type of loan is typically used when developers encounter unforeseen circumstances, such as cost overruns, delays, or changes in the market that make it challenging to repay the outstanding loan on a recently completed or nearly completed property. Rather than abandoning the project or investing more funds, developers can exit it and recover some or all of their investment through a developer exit loan. 
These loans are usually secured against the property being developed, and lenders may require additional collateral to mitigate the higher risks associated with early exits. The loan terms can be flexible, allowing borrowers to repay the loan over a shorter or longer period, depending on their needs.
Why are development exit loans used?
Developer exit loans are valuable in situations where setbacks have occurred due to insufficient contingency planning, events beyond anyone’s control, or miscalculations. In the past year, there has been a significant increase in developer exit loan business, mainly driven by developers depleting their own funds and 
original lenders unable to extend the loan term due to restrictions imposed by their funders.
Not all property finance lenders offer developer exit finance since it requires more diverse and flexible funding lines. Lenders typically provide these loans with specialised expertise in the development sector, as they have a deep understanding of structuring complex cases and evaluating builds to help complete them.
Which Lenders Provide Developer Exit Finance?
Developer exit loans are generally available to developers upon reaching the practical completion of a property. They are particularly useful when developers face unexpected challenges, such as adverse weather conditions, unanticipated expenses, or unforeseen issues that significantly impact the project’s timeline and budget. Repaying outstanding loans can become challenging in such situations, and a development exit loan provides the necessary support. By refinancing the current development finance and providing additional funds, these loans cover unexpected expenses and mitigate financial risks associated with unforeseen circumstances.
Is the property considered wind and watertight?
When considering a developer exit loan, an essential factor is whether the property is wind and watertight. This means the property has been constructed to a point where it is resistant to elements like wind and rain. Obtaining a developer exit loan is straightforward and low-risk when the property meets this criterion. These loans operate similarly to standard bridging loans, with rates and terms typically available up to 75% loan-to-value. Accurate valuations are possible at this stage since the property has already been built. 
The process becomes more complex if the property is not wind and watertight, but some lenders can still assist. These cases fall within the lender’s developer funding range and require customised underwriting and development expertise, making financing attainable.
If your property development is completed but unsold, and the repayment of the initial development funding is due, a development exit loan could be a viable option. These loans offer additional time to sell the units with a flexible, fast, and cost-effective financing structure. The extended time can maximise returns at the project’s end. With a development exit loan, you can benefit from a longer-term financing arrangement that is easier to manage and comes with lower borrowing costs. This loan type helps you achieve your project goals while mitigating financial risks associated with property sales.
