FINANCE & INSURANCE 61 MAKE A SHARP EXIT


If a particular development isn’t proceeding as planned, a developer exit loan could get you back on track. Roma Finance’s Steve Smith explains what the loans entail and how they could help you.


W


hether youre a fi rsttime developer or highly experi enced, you’ll know that property developments dont always run smoothly. rom unforeseen delays impacting your timeline to increasing costs, its not always possible to complete the proect and redeem your original loan on time. ut what happens when your lender cant offer you forbearance, and an extension And what happens if youre using your own money, and it simply runs out before you can complete your proect. his is when developer exit fi nance could save your proect.


WHAT IS IT?


A developer exit loan is used when a borrower needs more funds to fi nish their proect.


his could be because your original funder has pulled the plug on your fi nance before you have fi nished the build, or you are selffunding and have run out of money partway through.


WHICH LENDERS OFFER IT? ou may not have heard of developer exit fi nance because not every property fi nance lender offers it.


It tends to be provided by lenders with


more fl exible and diverse funding lines, which allows them to support a wider range of borrower circumstances. hese loans are also usually provided by lenders with strong expertise in the development sector, rather than pure bridgingonly lenders.


hats because the lender needs to understand how to structure more complex cases and have the development experience to assess the build and offer support to complete it.


WHO USES DEVELOPMENT EXIT LOANS? hey can be fi rsttime developers who dont have experience with how long


A DEVELOPER EXIT LOAN PROVIDES EXTRA MONEY, EXTRA TIME, OR BOTH, SO YOU CAN FINISH A PROJECT


builds can take. his has been more prevalent over the last few years, where weve seen long delays in sourcing materials and a higher number of builders being off sick through the pandemic and beyond. owever, its important to know that these loans are also reuired by very experienced developers. ometimes things go wrong through no fault of your own  bad weather halts progress, or the cost of materials spirals after the original estimates many other unforeseen issues can crop up.


here is also the simple benefi t of switching to developer exit fi nance to fi nish off the build cheaper. he wider factors impacting the development sector and causing potential delays include ovid, rexit and the war in kraine, alongside high infl ation. here are still delays in getting materials, and huge fl uctuations in costs that make it diffi cult for even the most experienced builders and developers to estimate correctly.


WHY IS IT USED?


A developer exit loan is used to provide extra money, extra time, or both, enabling


you to fi nish the proect. he end goal is to complete the development so you can exit the loan and still make some profi t.


hether the proect has fallen off track because the original funder was too relaxed and didnt build in a suffi cient contingency, events occurred out of everyones control, or youve made a miscalculation, you can still fi nd help. e have seen a  rise in developer exit loan business in the last year. his is mainly because people have run out of their own funds but also because the original lender cannot extend the term if the proect isnt completed sometimes their funder wont let them.


IS IT WIND & WATERTIGHT?


If the property is wind and watertight, a developer exit loan is straightforward, with minimal risk. It works like a standard bridging loan and can be available at the same rates and terms, with up to  loan to value. hats because the property has already been built and valuations at this stage are very accurate.


If the property is not wind and watertight, its more complicated, but


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