Finish and Exit Development Finance

Is a it a good idea?

Whether Finish and Exit Property Development Finance is a good idea depends largely on the individual circumstances of the developer and the project.

For many developers, it’s a valuable financial tool that can provide the necessary funds to complete a project and manage cash flow during the sales period.

However, it’s not a one-size-fits-all solution. Each development project is unique, with its own set of challenges and opportunities.

Therefore, it’s important to consider all the available finance options and choose the one that best fits your needs and circumstances.

For example, if you’re a property developer in Scotland working on a commercial development, and you’re nearing the end of your project but need additional funds to complete it, a Finish and Exit loan could be a great option.

On the other hand, if you’re a property developer in the UK working on a residential development and you have sufficient funds to complete your project and cover costs during the sales period, a Finish and Exit loan might not be necessary. In this case it would simply come down to how much money you can  save by switching and whether a longer sales period would be desirable.

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What are the key considerations?

When it comes to this type of property development finance, it’s not a decision to be taken lightly. Like a well-planned property development project, it requires careful consideration and planning. Here are some key factors to consider:

• Project Status: Finish and Exit Finance is typically used when a project is nearing completion. You’ll need to assess the status of your project and determine if this type of finance is the right fit.
• Financial Needs: Consider your financial needs. How much additional funding do you need to complete your project? Do you need a financial buffer during the sales period?
• Repayment Strategy: As with any loan, you’ll need a solid repayment strategy. This is typically dependent on the sale of the properties, so consider the property market conditions and your sales strategy.
• Costs and Fees: Be aware of the costs and fees associated with Finish and Exit loans. These should be factored into your project budget.
• Alternatives: Consider the alternatives. Are there other types of finance that might be more suitable for your needs and circumstances?

What are the alternatives?

While it can be a valuable tool for property developers, it’s not the only option. There are several alternatives that might be more suitable depending on your needs and circumstances.

• Development Finance: This is a more traditional form of finance for property development. It’s typically used to cover the costs of construction and development, but it usually requires the developer to have a significant amount of capital to contribute.
• Bridging Loans: These are short-term loans designed to bridge the gap between the need for immediate cash and the main finance becoming available. They can be used in a variety of scenarios, including property development.
• Commercial Mortgages: If your project involves commercial property, a commercial mortgage could be an option. These are similar to residential mortgages but are designed for commercial properties.
• Refinancing: If you already have a development finance agreement in place, you might consider refinancing to a different lender or loan product that offers more favourable terms.

How Much Can I Borrow?

The amount you can borrow with exit finance can vary depending on several factors. These include the Gross Development Value (GDV) of your project, the projected sales value of the properties, and the lender’s assessment of your project and financial situation.

Typically, you can borrow up to 70% of the GDV of your project. However, this can vary between lenders, so it’s always a good idea to speak to a broker or financial advisor to understand your borrowing potential.

What Are The Costs?

Like any type of finance, exit finance comes with its own set of costs. These can include interest rates, arrangement fees, exit fees, and valuation fees, among others.

Interest rates can vary depending on the lender and your financial situation, but they’re typically charged on a monthly basis. Arrangement fees are usually a percentage of the loan amount and are paid at the start of the loan. Exit fees, if applicable, are paid when the loan is repaid.

It’s important to factor in these costs when considering Finish and Exit Development Finance and to ensure they’re included in your project budget.

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How Long Does It Take To Arrange?

The timeline for arranging Finish and Exit Development Finance can vary depending on the lender and the complexity of your project. However, it’s typically a quicker process than arranging traditional development finance.

Once you’ve submitted your application and provided all the necessary information, a lender can usually make a decision within a few days. From there, it can take a few weeks to arrange the valuation, legal work, and other necessary steps before the funds are released.

However, this is a general guideline and the actual timeline can vary. It’s always a good idea to start the process as early as possible to avoid any potential delays.