Posts Tagged development exit finance

What Is Development Exit Finance? Development exit finance also known as development exit funding or development exit loans refers to a type of financing used in the real estate and property development industry. It is a short-term loan or financial solution designed to help property developers refinance an existing development project in order to repay their initial development loan and move on to the next stage of their property development process. Development exit finance typically comes into play when a property developer has completed the construction or renovation phase of a project and is ready to sell or refinance the property in order to recoup their investment and realize their profits. However, due to various reasons such as delays in obtaining permits, changing market conditions, or unforeseen circumstances, the developer may be unable to sell or refinance the property in a timely manner, which can put them in a challenging financial situation. Development exit finance provides a solution to bridge this gap and enable the developer to transition smoothly to the next phase of their property development venture. One of the main purposes of development exit finance is to provide developers with the necessary funds to repay their initial development loan. Development projects typically require significant upfront costs for land acquisition, construction, materials, labour, and other expenses. Developers often rely on development loans or construction loans to finance these costs, which are usually short-term loans with a fixed term, often ranging from 12 to 24 months. Once the development is completed, the developer needs to repay the initial loan, but if they are unable to do so due to various reasons, development exit finance can provide the necessary capital to pay off the original loan and avoid default. Development exit finance can take various forms, including bridging loans, mezzanine loans,