Development exit finance vs development finance
Development finance funds the build and is priced for construction risk. Development exit finance replaces it at practical completion, once that risk has gone, to fund the sales period more cheaply. This guide draws the line between the two.
Development finance funds a ground-up build or conversion and is priced for construction risk, drawn in stages against costs as the scheme is built. Development exit finance vs development finance is a question of timing: development exit finance is a bridging loan that replaces the development facility at or near practical completion, once the build risk has gone, so it is usually cheaper and funds the sales period while completed units sell or the scheme is refinanced. Development finance is sized against build cost and gross development value across construction; an exit bridge is sized against GDV on the finished asset. We arrange and place both; we do not lend.
At a glance
- Development financeFunds the build, priced for construction risk
- Development exit financeReplaces it at practical completion, usually cheaper
- Switch pointAt or near practical completion (PC)
- Exit loan sizingIndicatively up to 70 to 75 percent of GDV
- Exit loan termTypically 12 to 18 months across the sales period
- Exit routeUnit sales or refinance onto term or BTL debt
Two stages, two prices across one scheme
Development finance and development exit finance fund the same scheme at different points in its life, and they are priced for different risks. Development finance carries the construction risk: it funds a ground-up development or a conversion, is drawn in stages against build costs, and is priced for the chance that the build runs late, runs over budget or stalls. A development exit bridge carries almost none of that. It replaces the development facility at or near practical completion, when the building risk has gone and the asset is finished, and it funds the sales period while completed but unsold units sell down. That is the heart of the development exit finance vs development finance comparison: the build is the expensive risk, and once it is gone the finance can be cheaper.
Both are unregulated commercial facilities secured by a first charge over the scheme. DevExit arranges and places them. We are a finance arranger and introducer, not a lender and not FCA authorised, and the lending we arrange falls outside the regulated mortgage perimeter.
What the construction facility funds during the build
Development finance funds the construction of a scheme from the ground up, or a conversion of an existing building into completed homes or commercial space. The lender advances against build cost and a proportion of the gross development value (GDV), releasing money in stages as the work is signed off by a monitoring surveyor. The facility is priced for construction risk, so the interest cost is higher than finance on a standing asset, and the loan to gross development value (LTGDV) is held back to leave room for the things that go wrong on site.
- Funds a ground-up development or a conversion of an existing building
- Drawn in stages against build cost, signed off by a monitoring surveyor
- Sized against build cost and a capped percentage of GDV (the LTGDV)
- Priced for construction risk, so dearer than standing-asset debt
- Falls due at, or shortly after, practical completion
The problem for the developer is the maturity. The senior development loan usually falls due at practical completion, but the completed units rarely all sell on the day the scaffold comes down. That leaves a sales void: a finished scheme, a development loan repayment looming, and a sales period still to run.
Where a development exit bridge takes over at completion
A development exit bridge is the finance that solves the sales void. It is a bridging loan raised at or near practical completion to repay the senior development loan, taking the place of the maturing facility and giving the developer 12 to 18 months to sell the completed units or arrange a longer-term refinance. Because the construction risk has gone, the asset is lower risk than it was mid-build, and the finance can be set up to reflect that. Some lenders offer a finish and exit variant where a small amount of construction remains, blending development finance and exit finance until the scheme is signed off as practically complete.
The switch happens at or near practical completion. Most lenders want the scheme practically complete, with a building control sign-off or an architect's certificate, before they treat it as a finished-scheme bridge rather than development debt. Where minor works remain, a finish and exit facility covers the last of the build and converts to exit pricing once PC is reached. Reaching practical completion is the event that removes the construction risk and lets the cheaper finance take over.
Why exit funding usually costs less
Exit funding is usually cheaper than the development finance it replaces because the lender is no longer pricing the build. During construction the lender carries the risk of delay, cost overrun and a scheme that never completes. At practical completion that risk has gone, the security is a finished, saleable asset, and the lender prices a first-charge bridge against it rather than against a building site. The reduced monthly interest cost is the point: on a finished scheme the rate is lower, so refinancing onto an exit bridge cuts the carry during the sell-down and protects the developer's margin against a forced or fire-sale of completed units.
Interest is usually retained or rolled rather than serviced monthly, so the facility does not drain cash while units are still selling. Specialist lenders active in this space have built products specifically around refinancing completed or practically complete schemes to lower the cost during the sales period, and we place each case with the lender whose appetite fits the finished asset. The figures we quote are indicative, for illustration only, and are not an offer of finance.
Sizing a finished-scheme bridge on GDV
A finished-scheme bridge is sized against the gross development value (GDV) of the completed scheme, the open-market value of the finished units, rather than against build cost. Lenders express the limit as a loan to gross development value, indicatively up to around 70 to 75 percent of GDV, with the exact figure turning on the asset, the location and the saleability of the units. Where the development loan has been largely repaid through early sales, the headroom between the exit loan and the development debt it clears can release retained profit or equity back to the developer before the remaining units sell.
| Feature | Development finance | Development exit finance |
|---|---|---|
| Stage funded | The construction phase | The sales period after completion |
| Risk priced | Construction risk | Sales and refinance risk only |
| Sized against | Build cost plus a capped percentage of GDV | GDV of the finished scheme (LTGDV) |
| Indicative leverage | Lower LTGDV, held back for build risk | Up to about 70 to 75 percent of GDV |
| Drawdown | Staged against costs as built | Single drawdown at or near PC |
| Typical cost | Higher, priced for the build | Lower, build risk gone |
| Typical term | Set to the build programme | 12 to 18 months over the sales void |
| Exit | Sale or refinance, or an exit bridge | Unit sales or refinance onto term or BTL debt |
Releasing equity at this stage carries a cost, because every pound drawn against GDV accrues interest until the scheme sells or refinances. The discipline is to size the bridge against a realistic sales period, not an optimistic one, so the term covers the sell-down with a margin.
How we structure sales-period funding
We look at whether the priority is repaying a maturing development loan, funding a slow sell-down, or releasing retained profit, and we structure the sales-period funding around the real need. The bridge normally completes as a first charge that repays the senior development loan in a single drawdown, with interest retained or rolled so the facility does not drain cash while units sell. We line up the exit in advance, whether that is unit sales clearing the loan or a refinance onto investment term or buy-to-let debt where the developer holds the units. We are an arranger, not a lender, and we place each facility with the specialist lender whose appetite for the finished scheme fits the asset. Every figure we discuss is illustrative and not an offer of finance.
Development exit finance vs development finance: common questions
What is the difference between development exit finance and development finance?
Development finance funds the construction of a scheme and is priced for construction risk, drawn in stages against build cost and GDV. Development exit finance is a bridging loan that replaces the development facility at or near practical completion, once the build risk has gone, to fund the sales period while completed units sell or the scheme is refinanced. The build is the expensive risk; once it is gone the finance is usually cheaper.
When can you switch from development finance to development exit finance, and does the build need to reach practical completion?
The switch happens at or near practical completion. Most lenders want the scheme practically complete, evidenced by a building control sign-off or an architect's certificate, before they treat it as a finished-scheme bridge. Where minor works remain, a finish and exit facility covers the last of the build and converts to exit pricing once practical completion is reached. Practical completion is the event that removes the construction risk.
Is development exit finance cheaper than development finance, and why is the rate lower?
It is usually cheaper. During construction the lender prices the risk of delay, cost overrun and a scheme that never completes. At practical completion that risk has gone and the security is a finished, saleable asset, so a first-charge exit bridge is priced lower. The reduced monthly interest cost cuts the carry during the sell-down. Indicative figures only, and not an offer of finance.
Should I refinance onto development exit finance or just sell the completed units?
It depends on the pace of sales and the development loan maturity. If the senior development loan is falling due before the units have sold, an exit bridge repays it and buys 12 to 18 months to sell down without a forced sale. If sales are quick and the loan is comfortable, you may simply sell and clear the debt. Refinancing onto an exit bridge protects margin where a sales void would otherwise force a fire-sale.
How much can you borrow on development exit finance, on LTV or loan to GDV?
An exit bridge is sized against the gross development value of the finished scheme, indicatively up to around 70 to 75 percent of GDV, with the exact figure turning on the asset, the location and the saleability of the units. Where early sales have already repaid much of the development loan, the headroom can release retained profit or equity. All figures are illustrative and not an offer of finance.
Can development exit finance release my retained profit or equity before the units sell?
Yes, where the GDV supports it. If the development loan has been largely repaid through early sales, the gap between an exit bridge sized on GDV and the development debt it clears can release equity back to the developer before the remaining units sell. Every pound drawn accrues interest until the scheme sells or refinances, so the release is sized against a realistic sales period. We arrange it; we do not lend.
Exiting a completed scheme?
Send us the scheme and the gross development value and we will come back with a view on fundability and likely terms within one working day.