Finishing a property development project is a major achievement, but then comes the challenging part: selling the units.
Many developers find themselves caught between their development loan coming to an end and properties that haven’t yet sold. This creates real pressure, often forcing quick sales at reduced prices just to repay the original loan.
Sales period funding (also called development exit finance) offers a way out of this tight spot. You’ll have more time, potentially lower interest costs, and the freedom to achieve optimal sales prices without rushing.
Understanding Sales Period Funding
Sales period funding is also known as development exit finance. It replaces your development loan and bridges the gap between completing your development and selling the individual units.
Unlike standard development finance, which funds the construction phase, sales period funding kicks in once your project is substantially complete, usually when it’s 90-95% finished or has reached practical completion.
This type of finance has become increasingly common over the past decade.
Why?
Because property sales rarely match up perfectly with development timelines. The time needed to market and sell properties can vary widely depending on location, property type, and broader market conditions.
Sales period funding is particularly useful when:
- Your development loan term is ending but you haven’t sold all units
- You want to avoid discounting properties for quick sales
- You’re facing higher interest rates or extension fees on your current loan
- You need to release equity from the completed project to start a new development
In essence, it allows you to refinance your development at a point when the risk profile has changed. With construction risks largely eliminated, new lenders can offer more favourable terms than your original development finance. Saving you money.
Key Features
These loans are designed specifically for the sales phase of property development and come with several distinctive characteristics. Most loans run from 6 to 24 months, giving you ample time to achieve sales at the right price rather than being forced into quick transactions.
The loan-to-value (LTV) ratio for sales period funding usually ranges from 65% to 80% of the gross development value (GDV).
GDV refers to the expected value of the completed development when all units are sold. This means you can often borrow more against your completed project than you could during the construction phase.
There’s a few choices regarding how you pay the interest, and those available to you will depend on your lender.
You might choose to service the interest monthly, have it rolled up (added to the loan balance and paid at the end), or retained (deducted from the loan advance). Each approach has different cash flow implications that may suit different situations.
Fee structures include arrangement fees (commonly around 2% of the loan amount), along with valuation costs and legal fees. Some lenders offer no early repayment charges, which means you can pay back the loan as you sell individual units without penalty.
How Sales Period Funding Works
The process begins with an assessment of your development’s current status and value.
The lender will want to see that your project is substantially complete, with minimal remaining construction work. This usually means reaching practical completion or being “wind and watertight” with only minor finishing works outstanding.
A valuer will inspect the property to determine its current market value, which forms the basis of the loan offer. The valuation will consider both the individual unit values and the overall development value if sold as a whole.
From Application to Funding
Once approved, the funds from your sales period loan will first be used to repay your existing development finance in full. This immediately releases you from the higher interest rates and pressure of your development loan. Any additional funds above what’s needed to clear the existing loan can be released to you, providing capital for new projects.
Managing Sales and Repayments
As you sell individual units, most lenders will release the properties from the security of the loan.
They’ll require a partial loan repayment for each unit sold, often based on a loan-to-value calculation for that specific unit rather than a fixed percentage of the sale price. This structure means you can maintain the loan for the remaining unsold units while gradually reducing your debt as sales complete.
The loan ends either when all units are sold and the finance is fully repaid, or when the term expires. If units remain unsold at the end of the term, you’ll need to either refinance again or find alternative ways to repay the outstanding balance.
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Who Can Benefit?
Sales period funding works for developers of all sizes, from those working on single high-value properties to companies building multi-unit schemes. It’s particularly helpful for small to medium-sized developers who may have less financial flexibility than larger firms.
The experience requirements vary by lender.
Some require previous (relevant) development experience, while others place more emphasis on the quality and status of the completed development. First-time developers might find some options limited, but with a strong project and exit strategy, doors remain open.
Suitable Development Types
This funding suits various development types including:
- Residential apartment blocks
- Housing developments
- Mixed-use schemes
- Commercial developments
- Conversion projects
You’ll find this finance most useful when market conditions are changing or sales are taking longer than expected. It’s also helpful when you want to maintain asking prices rather than discount for quick sales, or when you need to release capital from one project to begin another.
Case Example: How Sales Period Funding Helps Developers
Consider James, a developer in Sheffield who completed an eight-unit apartment building. His 18-month development loan was nearing its end, with only two units sold and six remaining. The lender wanted full repayment, which would have forced James to slash prices by 15% to achieve quick sales.
Instead, James arranged sales period funding that paid off his development loan and gave him 12 months to sell the remaining units. The interest rate was 2% lower than his development finance, saving him money each month. With less pressure, he maintained his asking prices and sold all units within nine months, achieving his target profit margin.
The funding also released £150,000 in equity, which James used as a deposit on his next project. This kept his development business moving forward without interruption, creating a smoother cash flow between projects.
Advantages and Considerations
This type of development funding offers several clear benefits.
Perhaps most significantly, the interest rates are lower than standard development finance because the construction risk has been removed. This can save you substantial money over the loan term.
The extended marketing period allows you to hold firm on asking prices rather than discounting for quick sales.
Many developers find this alone pays for the cost of arranging the new finance. The ability to release equity from your completed project means you can start new developments while still selling your current one, creating business continuity.
Potential Challenges
While rates may be lower than development finance, they’re still higher than standard mortgages. There are costs involved in refinancing, including arrangement fees, valuation fees, and legal costs, which need to be factored into your calculations.
The biggest risk comes if properties simply don’t sell within the loan term.
In that case, you might need to refinance again or consider other exit strategies. That’s why having a realistic sales plan based on current market conditions is necessary when applying for this type of funding.
It’s also worth noting that lenders will have minimum requirements regarding the completion status of your development. Most want to see practical completion or near completion before offering sales period funding.
Alternative Options
While sales period funding works well in many situations, it’s not the only option available.
Some developers choose to extend their existing development loan, though this often comes with extension fees and higher interest rates. The main benefit is avoiding the costs of arranging new finance.
Another alternative is refinancing onto a term loan or buy-to-let mortgages if the properties are suitable for the rental market. This can work well if sales are particularly slow, but it changes your business model from development to investment and may not release as much capital.
Depending on the project size, a simple bridging loan may do the trick.
For some high-value projects, private wealth funding might be available through family offices or high-net-worth individuals who can provide more flexible terms, though access to these sources is limited without the right connections.
How a Specialist Broker Can Help
Finding the right finance for the latter stages of a development can be challenging because many of the lenders who offer it don’t advertise widely or deal directly with the public. This is where a specialist broker adds significant support.
A good broker will have established relationships with numerous lenders in this space, including private banks, specialist development exit lenders, and wealth management firms with lending capacity.
They’ll know which lenders offer the best terms for your specific situation and development type.
Expertise and Market Access
Experienced brokers can help structure your application to highlight its strengths and address potential concerns before they become obstacles.
They understand lender criteria and can match your needs with the most appropriate funding sources, often accessing better rates than you could find independently.
The broker will also handle the application process, coordinating between valuers, solicitors, and lenders to keep things moving. This saves you time and reduces stress during what can be a busy period as you finish your development and begin marketing units.
For high-value or complex developments, broker expertise becomes even more useful, as they can often negotiate bespoke terms that wouldn’t be available through standard applications.
Next Steps
Sales period funding, or dev exit finance, provides a practical solution for developers caught between completing their project and achieving optimal sales.
It offers breathing space, lower interest costs, and the opportunity to maintain asking prices rather than discounting for quick sales.
If you’re approaching the end of your development loan term and still have units to sell, now is the time to consider your options. Start by reviewing your current loan terms, including end dates and any extension possibilities.
Then assess your sales pipeline realistically, how long might it take to sell remaining units at full asking price?
For most developers, speaking with a specialist finance broker is the logical next step.
They can quickly assess your situation, explain suitable options, and give you a clear picture of what might be available. With their market knowledge, they’ll help you determine whether sales period funding is right for your circumstances and guide you through the application process if you decide to proceed.
FAQ
Development finance funds the construction phase of a project, whereas sales period funding comes in after completion. Development finance has higher interest rates reflecting construction risks, while sales period funding offers better rates because the major risks have been eliminated. Sales period funding also typically provides longer timeframes focused on the sales process.
The ideal time to apply is when your development is 90-95% complete or has reached practical completion, and you can see that selling all units might take longer than your development loan term allows. It’s best to start the process at least 4-6 weeks before your development loan expires to ensure a smooth transition.
Typical terms range from 6 to 24 months, with 12-18 months being most common. The term length depends on your sales projections, the number of units, and current market conditions. Some lenders offer extension options if sales take longer than anticipated.
Most lenders will release individual properties from the loan’s security when they sell. You’ll need to make a partial repayment of the loan based on either a fixed percentage of the sale price or a loan-to-value calculation for that specific unit. This allows for a gradual reduction of the loan as sales progress.
While not absolutely necessary, a broker with specialist knowledge of development exit finance can be invaluable. Many lenders in this space don’t deal directly with developers, and brokers have access to a wider range of options.
By releasing equity from your completed development, sales period funding can provide the capital needed for deposits on new projects or site acquisitions. This creates a smoother transition between projects without waiting for all sales to complete, helping to maintain business momentum.
Yes, sales period funding works for commercial developments, though the terms may differ from residential schemes. Lenders usually specialise in either commercial or residential, with commercial often having slightly lower LTV ratios (typically 60-70%) reflecting the different market dynamics.
Compare the total costs of both options, including interest rates, arrangement fees, and any extension fees. Consider the time needed to complete sales and whether your current lender is becoming impatient. Sales period funding usually makes financial sense if you need more than 3-6 months extra time or if your current lender is charging high extension fees.
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).
