Development Exit Bridging: finish line funding, so you sell well not fast

A development exit bridge refinances a completed or nearly completed scheme. It repays the development lender and gives you a term set by how long the units will take to sell, rather than by a build programme that has already finished.

Twenty five of the 67 short-term lenders we track (our wider panel runs to over 120 lenders across all product types) offer one, which makes it the second best supported product in the development cluster after senior debt itself. It is a bridging product rather than a development one: no staged drawdowns, no monitoring surveyor, no build left to fund. The lender is looking at finished stock and asking one question, which is how long it will take to sell.

This page starts with the question that decides most of these cases, which is how finished a scheme has to be. Then the mechanics underneath: what the rate saving actually comes to, why that is usually not the real reason to do it, how the sales period is assessed, how units are released as they sell, and what happens if the term runs out with stock unsold.

How finished does the scheme have to be?

There is no single answer, and where a lender sits on this spectrum determines both whether they will look at your scheme and what they will charge.

Practical completion with sign-off certificates. The standard position, and what most lenders mean by a development exit. The building is finished, practical completion has been certified, and the paperwork exists. Applications after practical completion have the widest lender choice and the best pricing.

Less than 10% of construction costs remaining. A common working threshold, used explicitly by at least one lender on our index, which will lend where the site is complete or almost complete on that basis and will consider earlier stages at reduced leverage.

Wind and watertight. Materially earlier, and offered by fewer lenders. One lender on our index runs a product described as finish and exit, with the stated requirement that the scheme must be wind and watertight. The remaining internal works are then funded alongside the refinance. This is the position that rescues a developer who has run out of money before the end of the build.

Any stage at all. Two lenders on our index will step in on a genuinely part-complete scheme, one stating plainly that it can step in at any stage, with the build facility available on day one, in tranches, or at practical completion. Leverage drops, pricing rises, and the product starts to resemble development finance again, but the money exists.

Building regulations sign-off is treated separately from all of this. It is rarely the trigger for the bridge itself, because a lender can take security on a finished building without it. It is almost always required before the units can be sold or refinanced onto a term mortgage, so it belongs in the exit assessment rather than the entry test. Expect a lender to want a date for it.

What that means in practice

The earlier the stage, the fewer the lenders and the worse the terms. A scheme at practical completion has 25 lenders available. A scheme that is wind and watertight has a handful. A scheme with the roof half on is a part-complete development facility, not an exit bridge.

The trigger is about marketability, not tidiness. What the lender needs is a building that could be sold if they had to sell it. Snagging outstanding is fine. Scaffolding still up and second fix not started is not.

Units being individually habitable matters on a phased scheme. Where a lender is going to release units as they sell, each one needs to stand on its own: its own services, its own title, and a building regulations position that lets it be occupied. A block where the units cannot be separately dealt with is funded as one asset, not as a series of releases.

What the rate saving actually comes to

Every page on this subject says a development exit bridge saves you money. It does, but not on the timescale most of them imply, and the arithmetic is worth doing before you assume it.

Take a scheme with £1,300,000 of debt at practical completion against a £2,000,000 GDV, which is 65% loan to value. Senior development debt at 0.85% per month, a development exit bridge at 0.65%.

Now put the cost of the refinance against it. A 1.5% arrangement fee on £1,300,000 is £19,500, plus valuation and legal costs on both sides at around £5,000. Call it £24,500 to do the deal.

On those numbers breakeven falls at roughly nine and a half months. On a six month sales period, refinancing purely for the rate loses you £8,900.

Two things make that picture flattering rather than pessimistic, and both push breakeven later:

An exit fee, where one is charged. Some lenders charge around 1% on redemption and others charge nothing. At 1% on this facility that is another £13,000, which moves breakeven out from nine and a half months to about fourteen.

The debt does not stay still. The table assumes £1,300,000 outstanding throughout. In reality units sell and the balance falls, on both the development facility and the bridge. That shrinks the monthly saving as the term goes on, so the real breakeven on any normal sale profile sits past twelve months and, with an exit fee, past fourteen.

That matters because a six month sales period is exactly what most developers assume they need. A development exit bridge is rarely justified by the rate saving alone.

So why do developers actually use one?

Four reasons, and the rate is the weakest of them.

The development facility has expired, or is about to. This is the real driver in most cases. Development facilities are written to a programme, and schemes overrun. When the term ends with stock unsold, the development lender's options are an extension, usually at 1% to 2% of the balance plus a fresh assessment, or enforcement. An exit bridge removes that pressure and buys a term set by sales rather than by a build that is already done. Against an extension fee of £13,000 to £26,000 on our example scheme, the £24,500 refinance cost reads very differently.

Avoiding a forced sale. This is the big one and it is almost never quantified. A developer under pressure from an expiring facility discounts to sell. A forced or rushed sale typically achieves 10% to 25% below open market value. On a £2,000,000 GDV that is £200,000 to £500,000. Against a £24,500 refinance cost the arithmetic is not close. The exit bridge is not buying you a cheaper rate, it is buying you the ability to hold out for the right price.

Releasing equity. Development facilities are sized against cost. Exit bridges are sized against value, and a completed scheme is worth more than it cost to build.

That cash goes into the next site, which for most developers is worth considerably more than the interest saving. It is frequently the actual reason for the refinance, whatever the enquiry says.

The costs that stop. Once the build is done the monitoring surveyor stops, and with it the initial and interim inspection fees, which on an eighteen month scheme run into five figures. Any non-utilisation fee on the undrawn development facility stops too. Those are real savings that never appear in a rate comparison.

The honest summary: take a development exit bridge for the term, the equity or the pressure. If the only reason is the rate and you expect to sell inside six months, run the numbers before you commit.

How much you can borrow

Against GDV, typically 70% to 75% gross. The market standard is 75% of the open market value of the finished scheme, with conservative lenders at 65% and a minority going higher. We have evidence of 83% on a real development exit at £2.3m for an experienced developer, which is exceptional rather than typical.

Less the cost of any remaining works. Where the scheme is not fully finished, the cost to complete is held back. A scheme that is wind and watertight with £150,000 of internals to do sees that £150,000 taken out of what it can draw, with the works often funded in tranches alongside. Lenders differ on whether the deduction comes off the value before the percentage is applied or off the advance afterwards, and on a facility this size that is worth about £37,000, so it is worth asking.

Reduced by your exit strategy, which catches people out. If the exit is a refinance onto a buy to let product capped at 70%, some lenders will cap the bridge at the same level, because lending 75% against an exit that only produces 70% leaves a gap nobody fills. Where the exit is a sale, the full 75% is usually available.

Loan sizes run from around £250,000 to £30,000,000 across the lenders we track, with a few setting a £500,000 minimum. Experience matters less than it does on senior development debt, because there is nothing left to build, but it is not irrelevant: at least one lender requires one prior similar completed project.

How the lender assesses the sales period

This is the underwrite. Everything else is mechanics.

Comparable evidence. Actual sold prices for equivalent units in the same location. Not asking prices, and not the GDV from the original appraisal. If the scheme was appraised two years ago and the market has moved, the lender works from today.

Absorption rate. How many units of this type sell in this location per month. On a six unit scheme in an area absorbing two a month, three months is plausible. On a twelve unit scheme in an area absorbing one a month, twelve months is the honest answer and the lender will set the term accordingly.

Evidence from the agent. Most lenders want something in writing from the selling agent: a marketing appraisal, a letter confirming the pricing strategy and expected timescale, or a full marketing report on larger schemes. An agent's letter is the normal minimum. On anything above a few units, expect the lender's valuer to opine on the absorption rate directly.

What is already under offer. Reservations, exchanged contracts and completed sales are the strongest evidence there is, and they move both the term and the pricing.

The marketing itself. Whether the scheme is actually on the market, at what price, through whom, and since when. A scheme listed for four months with no offers has told the lender something about the pricing.

Realistic pricing. A lender will not fund a term based on a price the evidence does not support. Where the valuer's unit values come in below the developer's, the facility reduces with them.

The term you will get is typically 12 to 24 months, with 18 months common and some lenders going to 24 or beyond. It is set by the absorption rate rather than by your preference, which is exactly why the agent evidence matters.

Partial redemption and release prices

Release per unit is standard on development exit bridging, and it is one of the main advantages over the facility it replaces.

How it works. A release price is agreed per unit at the outset. As each unit sells, that amount is paid to the lender and the unit comes out of the charge. The facility reduces, and the interest reduces with it.

How the release price is set. Almost always above the unit's pro rata share of the debt, so that loan to value improves as units sell rather than staying flat. A typical structure takes the debt, divides by the number of units, and adds a margin of 10% to 20%.

On our example scheme, £1,300,000 across eight units at £250,000 each:

The gap between the release price and the sale price is what you take out as each unit goes. Negotiate it, because a release price set too high means early sales produce no cash and the scheme runs out of working capital even while it is selling well.

There is a quirk worth knowing in that structure. At £178,750 a unit the debt clears after about seven and a quarter sales, so by the eighth unit there is only £48,750 left to pay and the whole remaining £201,250 comes to you. The back end of a release schedule is where the money is, which is another reason not to accept a front-loaded one.

How it differs from the development facility. Development facilities usually set release prices more aggressively, often requiring 100% of net sale proceeds until the debt is down to a target, because the lender is managing exposure during a build. Exit bridges are generally more generous, because the asset is finished and the lender's position improves with every sale. Moving to an exit bridge frequently improves the release terms as much as it improves the rate.

Get the mechanism confirmed in writing, including whether the lender requires proceeds to come directly from the buyer's solicitor and how quickly a release is processed. A slow release holds up a chain.

Retained, rolled up or serviced interest

This differs from the development facility you are coming off, and the difference is worth understanding before you sign.

Development facilities roll interest up on the drawn balance as the build progresses, because there is no income to service it.

Development exit bridges are more often retained, meaning the full term's interest is calculated and held back from the advance at the outset. That reduces your day one cash, and on a 24 month term it reduces it considerably.

Rolled up is available and some lenders offer it as standard on exit products. Rolled up gives you more cash on day one; retained gives you certainty and usually a cleaner redemption.

Serviced interest is genuinely viable here, which it rarely is on development finance, because completed units can be let. Most lenders permit letting on short-term or twelve month assured shorthold tenancies during the sales period, and the rent can service the facility. That preserves the net advance and reduces the total cost. It is worth asking about and it is frequently not offered unprompted.

On a retained facility, check the rebate. Units will sell during the term and the facility will reduce, so the retained interest on the redeemed portion should come back. Confirm the basis, because daily rebating from the start and rebating only after a minimum period produce very different numbers. Minimum interest periods of one, three or six months are common, with early repayment charges typically falling away after around three months. Our page on bridging loan rates goes through how retained and rolled-up interest change the net advance.

What happens at term end with units unsold

It happens. And the options are the same ones the development lender had, which is worth remembering before you treat an exit bridge as an escape rather than a postponement.

Extension. Usually available where sales are progressing and loan to value has improved. Expect a fee from 1% of the balance, a fresh valuation, and a shorter term than the first. Where the lender can see units selling steadily, extensions are routine. Where nothing has sold, they are not.

Refinance again. A second exit bridge with a different lender is possible but harder. A re-bridge raises an obvious question about why the first exit did not work, and some lenders decline re-bridges as a matter of policy or price them punitively. Leverage will be lower, because the lender is working from a market that has now demonstrated the units are slow.

Refinance onto a term product. Where the units are lettable, moving the unsold stock onto a buy to let or portfolio mortgage converts the problem into an income-producing asset and removes the deadline entirely. This is frequently the best answer and it is under-used. It needs the units to be individually mortgageable, with their own titles and building regulations sign-off, which is why those things matter from the start.

Reduce the price. The option nobody wants, and the one the whole exercise was designed to avoid. A 10% reduction across £2,000,000 of stock is £200,000, which is eight times the cost of the refinance that would have bought you the time.

Enforcement. The lender takes possession and sells, usually at a discount, with its costs added to your debt. On an exit bridge this comes faster than on a development facility, because there is no build to protect and the asset is immediately saleable.

What it costs

• Rate, broadly 0.65% to 0.95% per month depending on leverage, scheme and borrower, with the keenest pricing quoted as a margin over base. Real completions we have evidence of include 0.65% on a £2.8m scheme and 0.78% on an 83% loan to value facility
• Arrangement fee, typically 1% to 2% of the facility
• Exit fee, charged by some lenders at around 1% and absent at others, which as the table above shows is the difference between breaking even at nine months and at fourteen
• Valuation on the completed scheme, including unit-by-unit values where releases are planned
• Legal costs, both sides, more involved than on a standard bridge because of the release mechanism and the number of titles
• No monitoring surveyor, which is one of the genuine savings against the facility you are leaving

How quickly it completes

Quickly, because there is nothing to build and the valuation is of a finished asset. We have evidence of a £2.8m development exit completing in 21 days on a seven-flat office conversion. Two to four weeks is realistic, which is one reason this works as an answer to a facility that is about to expire.

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