Reaching the final stages of a property development can be stressful when your original finance term is ending but you’re not quite ready to sell.
Perhaps your project needs those final touches, or the market conditions aren’t ideal for selling right now.
With finish and exit finance, you can turn a potentially difficult situation into one where you maintain control, potentially save money on interest, and even free up capital for your next project.
What Is Finish and Exit Finance?
Finish and exit finance is a short-term funding solution designed for property developers who are approaching the end of their development project but need more time or additional funds before they finish the build.
It sits between conventional development finance (used during the main construction phase) and the final exit (selling the properties or refinancing onto a long-term mortgage).
Unlike standard development finance, which funds the entire construction process from the ground up, finish and exit finance comes in when your project is substantially built but not fully complete. It’s specifically structured for developments nearing completion, offering more competitive rates which reflects the reduced risk at this later stage.
You might also hear of funding called “development exit finance” or simply “exit finance,” but finish and exit finance is slightly different.
While development exit finance usually requires properties to be wind and watertight (weatherproof and secure), finish and exit finance can be arranged earlier in the process, providing funds to actually complete those final construction elements.
When Would You Need It?
You might need finish and exit finance when your current development loan is due to end but your project isn’t quite finished. This is quite common in development, where delays can happen for various reasons from supply chain issues to planning complications.
If you’ve used up your existing development funding but still need money (and time) to complete final works like decorating, landscaping, or snagging issues, finish and exit finance can provide those additional funds. This stops smaller details from holding up your entire project.
Many developers also turn to this option when they want more time to achieve better sales prices.
Rather than accepting the first offer that comes along, you can take a more measured approach to marketing your properties, potentially securing higher returns.
For experienced developers running multiple projects, finish and exit finance offers a way to release equity from a near-complete development to fund the next opportunity without waiting for final sales to complete.
You might also find this option appealing if you’ve calculated that the interest rates offered on finish and exit finance are lower than the costs of extending your current development loan.
That’s a win-win.
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How Finish and Exit Finance Works
Loan Structure and Terms
Finish and exit finance is structured as a short-term loan secured with a first-charge against your development property.
This new loan will replace your existing development finance facility.
Most lenders will offer between 65-75% of the Gross Development Value (GDV), though some might stretch to 80% in the right circumstances. For high-value developments, loan amounts can range from £150,000 up to tens of millions.
The loan term is between 3-18 months, giving you a reasonable timeframe to complete and sell your properties or refinance to a long-term solution. The property being developed serves as the primary security, though lenders may also require personal guarantees from company directors if you’re borrowing through a limited company.
Interest Payment Options
Interest is still charged monthly, either on a retained or rolled-up basis, where the interest is paid at the end of the term when you sell the properties.
The Application Process
When applying, you’ll provide documentation including your development plans, build schedules, proof of planning permission, details of contractors, evidence of previous experience, and your exit strategy. Lenders will want to see copies of your existing loan agreements and current valuation reports.
Lenders will require a fresh valuation of the development in its current state. This helps them assess both the current value and the projected GDV once complete. The good news is that finish and exit finance can often be arranged much more quickly than initial development finance, sometimes in as little as 7-21 days from application to funds release.
Before applying, make sure you have a detailed schedule of any outstanding works with associated costs, clear sales projections with timelines, and evidence of your marketing strategy. Having these elements well-prepared can significantly speed up the approval process.
Eligibility Criteria
Understanding what lenders look for can help you determine if finish and exit finance is right for your situation.
Project Completion Status
The stage of your development is a key consideration, most lenders prefer properties to be wind and watertight, meaning the building is weatherproof with the roof, windows and doors installed. However, some lenders will consider projects at earlier stages if there’s a clear plan to reach completion.
Developer Experience
Your experience as a developer will influence both eligibility and the terms offered. While experienced developers may access better rates, first-time developers can still secure finance if they have strong professional teams around them, such as established contractors or project managers.
Exit Strategy
As always, a viable exit strategy is essential. Lenders will want to see evidence that you have a realistic plan for repaying the loan, whether through property sales (backed by market research and a solid marketing plan) or through refinancing to a long-term mortgage (with proof of affordability).
The finance is available to various entity types, including individuals, limited companies, LLPs, and Special Purpose Vehicles (SPVs). Some lenders also consider offshore companies and trusts, though the criteria may be stricter.
Common Misconceptions
One common misconception is that your project must be 100% complete to qualify.
In reality, finish and exit finance is designed precisely for those projects that aren’t quite finished but are substantially advanced. Another myth is that only developers with extensive portfolios can access this funding. While experience helps, the strength of your current project and exit strategy often carry more weight with lenders.
Credit history is considered, but is rarely a determining factor, lenders take a more practical and holistic view on the overall viability of the project.
Costs and Fees
Replacing your property development loan means making an application to a new lender, and all of the usual costs and fees will apply.
Interest Rates
Interest rates vary depending on several factors: the loan-to-value ratio you require, your track record as a developer, the location and quality of your development, and how close to completion the project is. Generally, rates should be lower than the initial development finance, reflecting the reduced risk at this later stage.
Fee Structure
Arrangement fees are standard at 2% of the loan amount. This fee covers the lender’s costs for setting up the facility and is generally paid upon completion of the loan.
You’ll need to budget for legal fees – both your own and the lender’s. The property will require valuation, incurring valuation fees that vary depending on the property’s size and value. Some lenders may also charge an exit fee when you repay the loan, which might be a percentage of the loan amount or equivalent to one month’s interest.
Cost Comparison
Is it cheaper than extending your current development finance?
In many cases, yes.
Development lenders often charge premium rates for extensions beyond the agreed term, while finish and exit finance is designed for this specific stage and priced accordingly. However, you need to factor in all the new arrangement costs when making this comparison.
Understanding Interest Options
When discussing your options with lenders, make sure you understand whether interest will be rolled up (added to the loan and paid at the end), retained (taken upfront) or serviced (paid monthly).
With rolled-up interest, your debt increases over time, which affects your final profit margin. With serviced interest, you’ll need regular cash flow to make the monthly payments.
The difference between gross and net loans is also worth understanding. Some lenders calculate the loan based on the gross amount (the total you borrow), while others work with the net amount (what you actually receive after fees). This distinction can significantly affect your effective interest rate.
Main Benefits
For many developers, the cost savings and extended repayment term, will make this option particularly attractive.
Cost Savings
Finish and exit finance is specifically designed for this phase of development, generally offering more competitive interest rates that reflect the reduced risk of a nearly complete project. This can lead to significant savings over the extended period you need to complete and sell your development, directly improving your bottom line.
Extended Terms
The additional time provided by finish and exit finance can be just as valuable as the cost benefits. With loan terms typically ranging from 3-18 months, you gain breathing space beyond your original development finance deadline. This extension allows you to complete final works without cutting corners, properly market your properties, and wait for buyers willing to pay full market value.
Capital Release Opportunities
Another significant benefit is the opportunity to release capital from your near-complete project. This allows you to start your next development without waiting for all units in your current project to sell, helping you maintain momentum in your business.
Flexible Repayment Options
The flexibility in repayment structures helps you manage cash flow effectively during the final stages of your project. Options like rolled-up interest mean you can defer interest payments until you start generating income from property sales.
Lender Relationship Management
By refinancing, rather than extending your existing loan, you maintain good relationships with your development finance lender by repaying on time. This can be invaluable for future projects and funding needs.
How a Broker Can Help
Finding the right exit finance package can be challenging, especially when you’re busy managing your development project. This is where working with a specialist broker like Bridging Finance London can make a significant difference.
With access to over 250 lenders, including private banks and even wealthy individuals who lend their own money, a good broker can identify options you wouldn’t find on your own. Many of the most competitive lenders don’t work directly with borrowers, instead relying on trusted brokers to bring them suitable opportunities.
Presenting complex cases effectively requires expertise.
An experienced broker knows exactly how to structure your application, highlighting the strengths of your project and addressing potential concerns before they become obstacles. They understand what each lender is looking for and can match your specific needs to the right funding source.
The time-saving aspect shouldn’t be underestimated either.
While you focus on completing your development and marketing your properties, your broker handles the financing process, managing paperwork, chasing updates, and keeping everything moving forward.
At Bridging Finance London, the team’s experience with high-value property deals and complex financing scenarios means they understand the unique challenges faced by developers at the completion stage. Their relationships with lenders who specialise in this area can translate into faster approvals and more favourable terms.
Next Steps
Refinancing a development project provides a practical solution for property developers caught between the end of their development loan and the final sale or refinance of their project. It offers breathing space, potential cost savings, and the flexibility to complete your development without rushing.
The right time to consider this option is when you can see your development loan end date approaching but know you’ll need more time to maximise your returns.
Getting the timing right is essential – too early, and you might not meet the criteria; too late, and you could face penalties from your existing lender.
If you think finish and exit finance might be right for your situation, start by speaking with a specialist broker who can help you understand the options available for your specific circumstances. They’ll guide you through the process, find the most appropriate lenders, and help you prepare a compelling application.
FAQ
While development finance covers the entire build process from land purchase through construction, finish and exit finance comes in much later in the development cycle. It’s specifically designed for projects that are substantially complete but need more time or additional funds to finish minor works. The rates are lower than development finance, reflecting the reduced risk at this later stage.
The ideal time is when your development is nearing the end of its current finance term, but you still need additional time to complete final works or sell the units. Most lenders prefer properties to be at least wind and watertight (weatherproof with roof, windows and doors installed), though some lenders may consider earlier stages if there’s a clear path to completion.
Most lenders offer between 65-75% of the Gross Development Value (GDV), though some may stretch to 80% in certain circumstances. For high-value developments, loan amounts typically start from £150,000 and can reach tens of millions for larger projects. The exact amount will depend on your project’s value, your experience, and the strength of your exit strategy.
Lenders typically accept two main exit strategies: selling the completed properties or refinancing onto a longer-term mortgage product (such as a buy-to-let mortgage for rental properties). Your exit strategy needs to be realistic and well-evidenced, including market research for sales projections or proof of rental demand and affordability for refinancing options
Yes, finish and exit finance is available for commercial, residential, and mixed-use developments. The terms and loan-to-value ratios might vary depending on the property type, with commercial developments sometimes attracting slightly higher interest rates or lower LTV limits reflecting the potentially more complex sales process.
While most finish and exit finance will be capped at 65-75% of the Gross Development Value, some lenders may consider funding up to 100% of the remaining construction costs in certain circumstances, particularly if the overall loan-to-value ratio remains within their comfort zone. This depends on the lender’s policies, your track record, and the specific details of your project.
Finish and exit finance differs from standard dev exit finance in several key ways. While both are refinancing options for developers, standard exit finance typically requires your project to be fully wind and watertight or at practical completion. Finish and exit finance, however, can be arranged at an earlier stage of development.
The crucial difference is in the “finish” component – this product specifically allows for funds to complete the final construction elements or finishing touches on your development. Standard exit finance generally assumes the building work is essentially (90%) complete and focuses solely on providing time for sales or long-term refinancing.
Finish and exit finance offers more flexibility for developers whose projects aren’t quite ready for traditional exit finance but need to refinance their existing development loan. It bridges that gap between the main construction phase and having a fully completed, marketable property. This makes it particularly valuable for developments that have faced delays or unexpected additional work requirements near completion.
