Commercial & development
Move from practical completion to your next opportunity
Development exit finance is short-term funding used to refinance an existing development facility when a scheme is complete or nearing completion. It allows a developer to move off the original development finance, restructure the borrowing around the completed asset and create time for sales or longer-term refinancing. Where the valuation and lender criteria provide sufficient headroom, it may also release capital for the next project.
Discuss the exit before the deadline
Tell us the outstanding development loan, facility expiry date, completion position, remaining units and intended repayment route. We can assess whether a development exit loan, finish-and-exit facility or longer-term refinance is the appropriate next step.
How development exit finance works
A new short-term facility is secured against the finished or near-finished scheme. The advance first repays the existing development lender and agreed transaction costs. If the completed value supports a larger net advance, some capital may be released for another project. The exit loan is then repaid through individual unit sales, a whole-site sale, refinancing retained units or an agreed combination. Each lender applies different rules to the completion stage, valuation, permitted repayment route and release of units from its security.
Who this may help
We advise experienced developers and property investors with new-build, conversion and refurbishment schemes. This can include single high-value homes, housing or apartment developments, phased sites, residential-led mixed-use schemes and, subject to specialist appetite, commercial or operational assets. Strong teams and well-evidenced schemes can sometimes be considered where the borrower has limited direct development history, but experience remains an important part of the assessment.
What needs to be considered
- The current development-finance balance, redemption figure and facility expiry date
- The exact completion stage, remaining works, cost to complete and realistic timescale
- Practical-completion, building-control, warranty and other certification requirements
- The current value or gross development value and the valuation basis the lender will adopt
- The unit schedule, including properties sold, reserved, under offer and still available
- Current asking prices, achieved sales and comparable market evidence
- The repayment strategy: unit sales, whole-site sale, term refinance or a mixed exit
- The gross facility and the net day-one advance after interest, fees and other deductions
- Whether an equity release is required and how the additional capital will be used
- Interest method, loan term, arrangement and exit fees, extension terms and early repayment provisions
- Agreed release prices and how each sale reduces the loan and remaining security
- Borrower structure, developer experience, guarantees, debenture and any additional security
- Title, planning, leases, EPC, building-safety, insurance and conveyancing requirements
How ERG Finance approaches it
ERG Finance starts with the timing: what must be repaid, by when and from which outcome? We review the project, existing facility, remaining works, valuation evidence, sales schedule and next-project requirement before approaching lenders whose appetite matches the scheme. We compare the net advance rather than relying only on a headline loan-to-value, calculate the complete cost and test whether the proposed exit remains credible if sales or refinancing take longer than expected. We then coordinate the information required by the lender, valuer and solicitors so the structure is practical as well as competitive.
Development exit is different from development finance
Development finance funds land and construction, commonly through staged drawdowns and monitoring. A development exit loan is generally a single short-term advance made after construction risk has materially reduced. Some lenders require practical completion and the relevant certificates before they will complete; others can consider a scheme that is wind and watertight or has only limited works outstanding. If meaningful construction remains, a finish-and-exit, refurbishment or replacement development facility may be more suitable and can carry different pricing, monitoring and drawdown controls.
Releasing capital for the next project
A developer does not always need to wait for every unit to sell before recycling capital. If the lender’s accepted value supports more borrowing than the amount needed to redeem the existing facility, pay transaction costs and retain or roll up interest, the lender may permit a cash release. The funds could contribute towards another site, planning and professional costs, or the early stages of a new scheme.
Capital release is not automatic. The lender considers the purpose, net loan-to-value, sales evidence, remaining security and repayment plan. The additional borrowing also increases interest and risk, so ERG Finance will test the commercial benefit rather than treating the maximum available loan as the target.
The valuation and net advance matter
The headline gross development value is not necessarily the value used for lending. A valuer may report individual unit values, the market value of the whole site, a restricted-marketing value or a figure reflecting a bulk sale. The lender then applies its loan-to-value limit and deducts retained or rolled-up interest, arrangement fees and other costs. For the refinance to work, the resulting net advance must clear the existing lender and transaction costs before any capital can be released.
Information that helps us assess the exit quickly
- Current facility letter, latest statement or redemption figure, and maturity date
- Latest monitoring-surveyor or quantity-surveyor report and details of any remaining works
- Schedule of units with proposed values, asking prices, reservations and completed sales
- Planning, building-control, practical-completion, warranty and EPC documents available to date
- Title and lease information, including the position on separate unit titles where relevant
- Developer background, ownership structure, assets, liabilities and credit information
- Required loan, proposed capital release and a realistic primary and secondary repayment strategy
Our role
- structure the facility around the redemption requirement, sales period and any justified capital release
- identify lenders whose criteria match the completion stage, location, asset type and repayment route
- compare the net advance, interest method, fees, unit-release terms, flexibility and total cost
- prepare a clear submission supported by completion, valuation, sales and borrower evidence
- coordinate with the lender, valuer, solicitors and existing finance provider through to completion
- keep the next exit in view, whether that is sales, investment refinance or a combination of both
Frequently Asked Questions
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Development exit finance is short-term lending secured against a completed or near-complete property development. It normally repays an existing development facility and funds the period before the scheme is sold or moved to suitable longer-term finance.
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Yes. Repaying or refinancing the current development lender is one of its principal uses. The net advance must be sufficient to cover the redemption figure and transaction costs, and the new lender will take the agreed security when the existing charge is released.
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Begin the conversation before the existing facility expires and while there is enough time for valuation, underwriting and legal work. Terms can sometimes be agreed before practical completion, subject to the project reaching the lender’s required stage before funds are released.
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Not in every case. Many lenders require practical completion, building-control sign-off and an acceptable new-build warranty or other certificate. Some consider schemes with limited works outstanding, while a project with material construction risk may need finish-and-exit or replacement development finance instead.
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Potentially. Capital can be released where the accepted valuation and lender’s limits leave enough net headroom after repaying existing finance, fees and interest. The lender will also assess the proposed use of funds and whether the remaining exit remains credible.
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The amount is normally limited by the lender’s percentage of its accepted valuation and by the net funds needed for a workable transaction. Completion stage, remaining works, sales progress, property type, location, experience, credit profile, interest method and exit strategy can all influence the result.
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It can be priced more keenly once construction risk has reduced, but a saving is not guaranteed. Compare interest with the arrangement fee, valuation, legal costs, any exit fee, the cost of leaving or extending the existing facility and the likely period before repayment.
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Usually, where unit sales form the agreed repayment strategy. The lender will set release terms for each property. Sale proceeds commonly reduce the facility, and the value of the remaining security must continue to support the outstanding debt.
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Common routes include individual unit sales, sale of the complete scheme, refinancing retained units onto buy-to-let or commercial finance, or a combination. Lender appetite differs: some require a sale exit, while others can consider a period of letting and income stabilisation before refinance.
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Interest may be serviced monthly, retained from the facility or rolled up for repayment at the end. Retained or rolled-up interest reduces the cash available on day one and is normally included when the lender tests the maximum facility.
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Timing depends on the quality of the information, valuation availability, project certification, legal title, redemption requirements and lender underwriting. A well-prepared case can progress quickly, but it is safer to plan ahead than rely on an emergency completion.
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Most business-purpose development exit and commercial lending is not regulated by the Financial Conduct Authority. The precise position depends on the borrower, purpose and security, so ERG Finance will establish the regulatory status before recommending a route.
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PROPERTY OR OTHER ASSETS USED AS SECURITY MAY BE REPOSSESSED IF THE SECURED DEBT IS NOT REPAID. Development exit finance and commercial lending are not usually regulated by the Financial Conduct Authority. Regulatory status depends on the borrower, purpose and security; ERG Finance will establish the position before recommending a route.