"A developer exit loan can save your project if you run out of money, whether you’re funding the project yourself or borrowing from a lender that isn’t able to give you any more money"
Life has a habit of getting in the way of the best-laid plans, especially when it comes to property development.
If you’re struggling to complete a project because of spiralling costs, unexpected delays or other problems, you might need to borrow more to finish the work.
Or if you need more time but your existing development loan needs to be repaid, you may need to look elsewhere for funding.
A developer exit loan can be a lifeline to help you complete your project, pay off your loan and create wealth.
So, if your property project has been derailed, a developer exit loan could get you back on track.
Below are 10 key facts you need to know about them:
1. They give you more time to cross the finish line
If your original loan term is up and your lender can't or won't extend it, a developer exit loan can give you more time to successfully complete your property project.
2. They provide that all-important cash boost
A developer exit loan can save your project if you run out of money, whether you’re funding the project yourself or borrowing from a lender that isn’t able to give you any more money (sometimes their funders won’t let them).
3. They work like other bridging loans
Like a bridging loan, a developer exit loan is a short-term property finance loan. The difference is that you’ve already started your project and the loan allows you to complete it and repay any existing loans and on time. They usually last from three to 24 months, are available up to 75% LTV and range from around £50,000 and into the millions, depending on the lender.
4. Not all property finance lenders offer them
Developer exit loans are usually offered by bridging lenders with strong expertise in the development sector. The lender needs to know how to structure more complex cases and have the development experience to assess the project and understand the current state of the build – even better if they know how to help you complete it.
5. Look for lenders with flexible funding lines
Developer exit finance is often provided by property finance lenders with more than one funding line. That’s because having more flexible and diverse funding allows them to support a wider range of borrower circumstances, including projects that haven’t gone to plan.
6. Projects can go wrong through no fault of your own Needing a developer exit loan doesn’t mean you’ve made a mistake. From unforeseen delays impacting your timeline to spiralling costs, it’s not always possible to complete the project and redeem your original loan on time. Developer exit loans are used by a range of borrowers, from first-time developers to experienced developers who have seen things go wrong through no fault of their own. Sometimes it can be as simple as a spell of bad weather halting the build.
7. The lender and developer have a shared goal
The purpose of a developer exit loan is to provide extra money, extra time, or both, to help you finish the project. The end goal is to help you successfully complete the property development so you can exit the loan and still make some profit.
8. Is it wind and watertight?
A key factor in underwriting these loans is checking whether the property is wind and watertight. If so, the loan presents the lender with minimal risk and is straightforward to underwrite, as the property has already been built and valuations at this stage are very accurate. At Roma, it works like a standard bridging loan and is available on the same rates and terms, up to 75% loan to value.
9. When it’s more complicated…
If the property isn’t wind and watertight, it doesn’t mean you can’t get a loan. It’s just more complicated. Some lenders will still be able to help. This sort of case sits within Roma’s developer funding range, for example, and requires more bespoke underwriting and development expertise. But it’s still possible.
10. A growing market
There have been large delays in getting materials and spiralling costs over the last two years, partly due to the pandemic, Brexit and the war in Ukraine. This has meant more projects going off track and more borrowers seeking support.
At Roma Finance, we’ve seen a 50% rise in developer exit loan business in the last year. This is usually because people have run out of their own funds but also because the original lender hasn’t been able to extend the term if the project isn't completed.
Property developments don’t always run smoothly.
A developer exit loan provides extra money, extra time, or both, to finish the project. It will allow you to get back on track, rescue your development project, and still allow you to create wealth.
