Finish and Exit Development Finance

What is finish and exit development finance?

Finish and exit development finance provides a single facility that funds two things: the cost of completing an unfinished or stalled development, and the subsequent exit period while your completed units are sold or refinanced. It is used when a development has stalled midway through construction, whether because the original lender has withdrawn, your build budget has run short, an unforeseen cost overrun has exhausted contingency, or a dispute with the contractor has caused the programme to stop.

The appeal of a single finish and exit facility is that it combines what would otherwise be two separate products (a new development loan to complete the build plus a development exit loan for the post-completion period) into one facility arranged at the outset. This simplifies the underwriting and avoids the risk of being unable to arrange exit finance once practical completion is reached. It also allows the lender to assess both the completion risk and the exit strategy simultaneously, which can lead to more competitive terms than arranging the two products separately.

When finish and exit finance is needed

The specific circumstances that require finish and exit finance include: development stalled partway through (structural frame up, roof on, or first fix complete but not finished), the original development lender has called in the loan or declined to extend it, you have run short of build budget due to cost overruns, supply chain issues have caused delay and your original facility has expired, or a new purchaser has acquired a part-built scheme and needs finance to complete.

Finish and exit finance is also used when you anticipate that the original development loan will not extend far enough into the post-completion period for you to achieve your sales or refinance plan. Rather than hitting a wall at practical completion, you arrange finish and exit at the outset to bridge the entire period from current point to exit.

How it differs from standard development exit finance

Development exit finance is used when a scheme is at or near practical completion. The construction risk has essentially passed. The lender is bridging to sale or refinance. Finish and exit finance is used when construction is still incomplete. The construction risk remains. The lender must assess remaining build costs and programme, the credibility of the contractor, and the cost to complete vs the value of the completed scheme.

The presence of remaining construction work means underwriting is more complex and rates are higher than development exit finance. Indicative rates on finish and exit range from 0.95% to 1.5% per month during the construction phase. Once practical completion is achieved, some lenders reduce the rate because the construction risk has passed. The lender is underwriting both the completion risk and the exit risk simultaneously in a single product.

How finish and exit facilities are structured

The facility contains two distinct components, though they are combined into a single line of credit. The finish component funds the remaining build costs. The exit component covers the period after practical completion until you have sold units or refinanced.

Finish component

Funds the remaining build costs, released in staged drawdowns verified by a monitoring surveyor. The monitoring surveyor reviews the remaining schedule of works, certifies completions at each stage, and verifies that the cost to complete is within the agreed budget. Typically you will draw the facility in 4 to 8 tranches as construction progresses.

Exit component

The term runs beyond practical completion to allow time for sales or refinance. Interest continues to roll up during this period on the outstanding balance. The exit component will typically cover 6 to 12 months post-completion, depending on your sales forecast and the lender's appetite.

Total facility size = outstanding amount on the existing (called-in) development loan plus remaining build costs plus rolled-up interest to completion plus exit period interest. This is then capped against LTGDV of the completed scheme. If the total exceeds the LTGDV cap, you will need to inject additional equity or arrange mezzanine finance.

Underwriting considerations for stalled developments

Lenders underwrite finish and exit cases more conservatively than standard development finance. The key additional assessment is the independent cost-to-complete report from the monitoring surveyor, not just your own estimate. This is critical. Lenders will not fund based on developer estimates alone.

Other key assessments include contractor creditworthiness (the original contractor or a replacement), build programme credibility, the cause of the stall (cost overrun, lender withdrawal, contractor default, or dispute), and your development track record. Even first-time or inexperienced developers can access finish and exit finance if the scheme fundamentals are sound and the cost to complete is well-evidenced.

The lender will also assess your equity contribution. Some lenders require the borrower to contribute equity alongside the facility. Where the LTGDV cap means the senior facility does not cover the full cost to complete, mezzanine finance can bridge the gap.

Rates and costs

Finish and exit rates reflect the combined construction risk and exit risk. Indicative rates range from 0.95% to 1.5% per month during the construction phase. Some lenders apply a single blended rate for the full term. Others reduce the rate once practical completion is achieved, because construction risk is removed and the facility becomes a pure exit product.

A finish and exit facility is structurally more expensive than a standard development exit facility because lenders are pricing two distinct risk periods into a single product. On a £1 million finish and exit facility at 1.1% per month, you pay approximately £11,000 per month in interest. An equivalent exit-only facility at 0.8% per month costs £8,000 per month, saving £3,000 per month or £18,000 over a six-month exit period.

Beyond the rate, you will incur an arrangement fee (typically 1 to 2% of the facility), monitoring surveyor fees throughout the construction phase, and a post-completion valuation fee. FD Commercial charges a broker fee of up to 1% of the loan amount, which reflects the complexity of arranging and managing the facility through construction to completion and exit.

Equity requirements and mezzanine

Finish and exit lenders typically require the borrower to contribute equity alongside the facility. This is the senior lender's way of ensuring you have skin in the game and are committed to completing the scheme. Where the LTGDV cap means the senior facility does not cover the full cost to complete, mezzanine finance can bridge the gap.

Mezzanine on a finish and exit is high-cost. Indicative rates are typically 1.5% to 2.5% per month. Mezzanine lenders take a second-ranking charge behind the senior facility, so they price in the risk that if the scheme fails, they recover nothing. However, mezzanine can prevent a viable scheme from stalling permanently through lack of capital. If the scheme fundamentals are sound and you can demonstrate realistic exit viability, mezzanine can be worth the cost.

Finding a new contractor

If your original contractor has defaulted, been dismissed, or gone insolent, the first task before approaching a lender is identifying a replacement contractor who can take over mid-programme. This is critical. Lenders will not advance without a credible replacement contractor in place.

You will need to provide the lender with evidence of a signed or heads-of-terms contract with the replacement contractor, the replacement contractor's assessment of works completed to date (condition and quality), and a revised cost to complete prepared by the replacement contractor. We work alongside developers to present this information in a form lenders can underwrite efficiently. A clean handover package from old contractor to new contractor is essential.

Process steps

Frequently asked questions