Developer exit loans growing in popularity

By Bridging Loan Directory 26th April 2018

Savvy property developers across the UK are increasingly turning to developer exit loans to keep their pipeline moving and finance their next project.

Top 10 Finance Ltd, a specialist property development finance broker that’s been working with property developers for over 15 years, has revealed that it’s seen a 100% increase in applications for this type of finance in the last 12 months.

The increased interest in developer exit loans has been attributed to a shifting developer mind set and the introduction of second home stamp duty.

The 3% stamp duty levy took effect from 1st April 2016 and over the last six months, its impact has become evident to the expert team at Top 10 Finance with applications slowing down, particularly in London and the South East.

However, this has been offset by a significant jump in developer exit loans, signalling that developers are still confident in their projects moving forward despite hesitation from buyers.

Zara McDermott, pictured, Director, Top 10 Finance, explained:

“The slowdown has obviously impacted property developers, who are sitting on finished projects with capital tied up that can’t be utilised to fund the next development.

It’s had a knock-on effect that’s created a vicious circle and having a substantial impact on future development.

However, developer exit loans have provided a significant opportunity and the 100% year on year increase in demand we’ve experienced demonstrates there’s an appetite to push forward with new developments.

Developer exit loans act as a bridging loan, providing property developers with capital quickly, allowing them to get their cash out and move onto the next development project, rather than waiting until completed properties are sold. In a market where buyers are a little more cautious.”

Exit finance provides a flexible way to access cash that’s locked in property, typically up to 75% of the loan-to-value (LTV) can be released and refinanced.