It’s no secret that the UK is suffering from a housing shortage, yet data from the National House Building Council shows that 2022 was the best year for new home registrations since 2007.
Despite the challenges of the end of last year amid the fallout from the mini-Budget, we know from our conversations with brokers that interest among developers remains as healthy as ever.
It’s not just the start of the development project that’s crucial but how it will come to an end too and all developers will have some sort of exit strategy in place from the outset.
Having a plan is crucial for anyone taking on any form of credit; there needs to be some thought given to how it will be paid off, as no two development projects are ever alike, and that can mean new tests and challenges are thrown the way of the developer.
Being able to adapt those plans is crucial to ensuring that it remains a success.
A shift in plans
It may happen that the developer is nearing the end of their finance term, but the units have not all been completed or sold off yet.
The developer is then in a difficult spot in working out how to pay off that development finance loan before the deadline, or may come to the end of the project and find that the state of the market is different from when the build began.
Such a shift could dramatically alter the profitability of the project, making it less appealing to go through with selling the units immediately.
Adaptability
When circumstances change, when the exit plan needs to shift, then often so will the financing plan.
Few developers can carry out their projects without the support of some sort of specialist lending.
Development exit finance has become more prevalent in recent years, as lenders have woken up to the need to deliver a form of funding specifically for developers who need something to tide them over, before they either sell off the units entirely or move onto more long-term finance.
The pricing of development exit finance deals works out cheaper than the regular development finance deal by ensuring that the developer can maximise the returns from their project.
Finding specialist finance
The specialist market moves quickly, and so identifying the right funding solution for a client looking for development exit finance is not always straightforward.
We built the ‘Provide Finance’ platform to take the stress out of sourcing specialist products, developing technology that allows brokers to immediately connect with hundreds of lenders active in this sector, to ensure they find the right deal and at the right price.
