Development exit finance criteria and eligibility

What lenders check before approving a development exit bridge

A development exit bridge replaces an existing development facility once the scheme is built or nearly built. Because the construction risk has gone, the funder is no longer pricing a building programme; it is pricing a finished or almost finished asset and a sales period. That shifts the checklist away from build monitoring and onto value, saleability and a clean repayment route. The development exit finance criteria below are the questions a lender works through, broadly in this order.

• Is the scheme at, or close to, practical completion, with evidence to prove it
• What is the gross development value, confirmed by a RICS Red Book valuation
• How much is being borrowed against that value, expressed as loan to GDV
• Can the lender take a first legal charge over the scheme
• Where the exit is sales, what reservations or completed sales are in place
• Are the building warranties and building control completion certificate available
• Does the borrower or special purpose vehicle have a credible track record
• Is there a defined, evidenced exit by open-market sale or refinance

Meet those eight points and a scheme is fundable. The rest of this guide explains what each one means in practice and the evidence a funder expects to see.

Practical completion and the finished-scheme test

The first eligibility test is build stage. Most lenders want the scheme at practical completion, the point at which the contractor confirms the works are complete bar minor snagging. A finished-scheme bridge is the cleanest case because the asset can be valued, insured, occupied and sold. Practical completion is normally evidenced by the contract administrator's or architect's certificate, alongside the building control completion certificate and the structural warranty.

Many funders will also lend near practical completion, where a small amount of work remains, such as landscaping, final fit-out or snagging. In that scenario the lender holds back part of the advance until the final account is settled and the completion certificate is issued, and it may instruct a monitoring surveyor to sign off the remaining works. The closer the scheme is to genuinely finished, the higher the day-one advance and the lower the rate, because the lender is carrying less residual build risk.

Sizing a sales-period bridge against GDV

A sales-period bridge is sized against gross development value, the open-market value of the finished scheme once all units are sold, confirmed by a RICS surveyor in a Red Book valuation. The headline measure is loan to GDV, often written LTGDV. Indicatively, lenders advance up to around 70 to 75 percent of GDV, and they also apply a loan to value test against the present value of the asset as it stands. The lower of the two tests governs the maximum loan amount. These figures are illustrative and not an offer of finance.

Because the build risk has gone, an exit facility is priced below the development loan it replaces. The interest is usually retained from the advance or rolled up and settled at exit, so the developer is not servicing monthly payments while units sell. A first legal charge is the standard security; some lenders will sit behind a senior facility on a second charge or release profit against the scheme, but that is assessed case by case.

Sales evidence and the documents an exit funding application needs

Where the exit is open-market sale, lenders want evidence that the units will actually sell. Reservations and pre-sales carry real weight: signed reservation forms with deposits taken, a sales agent appointed, and any completed plot sales all reduce the lender's view of sales risk and can lift the advance. On a refinance exit to a buy-to-let or term loan, the equivalent evidence is a tenancy schedule, a decision in principle from the incoming lender, or proof of rental demand. A clean exit funding case rests on documents, so the pack a lender expects is consistent.

1. RICS Red Book valuation confirming GDV and present value
2. Building control completion certificate for the finished scheme
3. Building warranty, such as an NHBC or comparable structural warranty
4. Practical completion or architect's certificate, plus the final account
5. Sales evidence: reservation forms, deposits, an agent's marketing report or completed plot sales
6. Proof of the exit: sales pipeline, or a decision in principle and tenancy schedule for a refinance
7. Borrower and SPV details, with the developer track record and a schedule of completed schemes

The borrower track record sits behind every line of that pack. A developer who has delivered comparable schemes is straightforward to place. A first-time developer is not excluded, but the lender leans harder on the strength of the sales evidence, the contractor's record and the valuation, and may set a more conservative loan to GDV. The borrowing entity is usually a special purpose vehicle, and lenders run the usual identity, source-of-funds and credit checks on the directors behind it.

Costs, term and exit on a completed-development loan

A completed-development loan runs for a defined window, typically 12 to 18 months, matched to the time needed to sell the units or arrange a refinance. The cost has three parts: the interest rate, an arrangement fee, and an exit fee charged on redemption or against the loan or GDV. Valuation and legal costs sit on top. We quote indicative figures only; the precise rate depends on the asset, the leverage, the strength of the sales evidence and the exit, and nothing here is an offer of finance.

The exit strategy is itself an eligibility criterion. Lenders will not advance against a vague plan. The two accepted routes are an open-market sale of the units, evidenced by the sales pipeline and reservations, or a refinance onto longer-term investment or buy-to-let debt, evidenced by a decision in principle and a tenancy schedule. A defined, dated exit that repays the facility within the term is what turns a strong scheme into an approved development exit finance criteria match.

How we arrange the development exit facility

We are a finance arranger and introducer, not a lender, and we are not authorised by the Financial Conduct Authority because the development exit facilities we place are unregulated commercial lending. We structure each case against the criteria above, assemble the valuation, warranty, completion and sales evidence into a clean pack, and place it with the funder whose appetite for the scheme, the leverage and the exit fits best. Where a deal would require FCA authorisation, we refer it to a regulated firm.

If you are weighing whether a finished or nearly finished scheme qualifies, the practical step is to confirm the build stage, get the RICS GDV figure, and set out the exit. With those three in hand we can give an indicative view of the loan to GDV, the term and the likely cost. All such figures are illustrative and not an offer of finance.