Finance for Property Developers

Finance for Property Developers

Developer Exit Finance

Developer Exit Finance (also known as Sales Period Finance) is effectively bridging funding for constructed but unsold developments where funds are provided by a new lender to repay the development finance lender and if required release equity for cash flow.

Market Sectors

Residential.

Benefit to Property Developers

  • Extended term for sales of asset thus avoiding the need to sell quickly at a discount (up to 12 month term)
  • Pricing is often cheaper than Development Finance (there is no construction risk).
  • Up to 75% GDV can be borrowed often meaning that there is equity available, once the development finance lender is repaid. This may be used to acquire further projects or for general cash flow.
  • Some of these lenders will agree to a repayment programme where they take less than 100% of the sale proceeds of each unit, thus creating further positive cash flow for the borrower.

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Leverage

Developer Exit Finance is available up to 75% of the GDV of the asset.

Pricing

  • Interest from 6-8.5% PA, depending upon LTV, asset, location etc. + lending fee in.
  • Interest may be retained, rolled up or serviced (subject to lender policy and underwriting).
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Construction Type

New Build, Conversion and Heavy Refurbishment projects.

Location

England, Wales, Scotland

Borrowing Entities

  • Sole traders, partnerships, LLP’s, Ltd Co’s and offshore vehicles.
  • Where the borrower is to be an offshore vehicle full disclosure and audit of the directors and beneficial owners is required.

Security

  • 1st Legal Charge.
  • Debenture (incorporated borrowers).
  • Personal or Corporate Guarantees (incorporated borrowers - as a norm; lowly leveraged projects where the borrower has a strong financial covenant may be an exception). The amount any type of Guarantees vary from full debt to a percentage of build costs and interest, depending upon the lender’s policy.
  • The asset must be fully constructed and signed off for both building regulations and CML warranty. All planning conditions must be satisfied in a timely manner.

Loan Size

At Optima we broker Developer Exit Finance from £500k to £10M (currently maximum available although Bridging Finance may be available for larger projects).