During the current Covid-19 pandemic, we have received an increased number of enquiries regarding refinancing existing development finance. These have mainly been brought about by overruns either in terms of cost or time and their current lender not being helpful.
The type of situations that the developers are finding themselves in are:
- Their relationship with the current lender has broken down, and they are either delaying or stopping drawdowns.
- They are running out of time to complete the project, due to unforeseen delays and the lender is not willing to extend the term.
- The lender is demanding excessive fees and interest rates to extend the loan.
- Pressure is being applied to reduce sales prices and hence their profits.
By swapping on to an exit loan, the developer benefits from:
- The new loan is often cheaper, as the risk is reduced once the development is out of the ground, particularly when it is wind and watertight and allows the lender to reflect this in the cost.
- If works are not yet complete, further funds can be released for the development.
- It removes the time pressures to allow a suitable marketing period and to obtain the prices which are acceptable to them
- It frees up cash towards new projects, thus allowing the developer to acquire the next site, whilst completing the existing development
Switching to a Developer Exit Loan will often be cheaper, buy the developer extra time and release additional cash to complete the current development or provide the initial finance for the next project.
If you need help with this or any type of property finance please contact me and the team using the form below.
Contact Brooklands Commercial Finance