£1.75m Finish and Exit Finance for a Stalled Scheme near Taunton

The situation

The clients were a two-partner development team building seven houses in a village on the edge of Taunton, their fourth scheme together. The original 18-month development facility had been running to plan until the main contractor went into administration at month eleven with the scheme roughly two thirds built, and the four months it took to novate the subcontracts, re-tender the remaining packages and get a replacement contractor mobilised ate the rest of the term.

By the time the facility expired the scheme was 80% built. Roofs on across all seven units, first fix complete on five, kitchens, second fix and externals still to come. The incumbent lender had granted one three-month extension with a fee and a stepped-up rate, and made it clear in writing that a second extension was not coming. The scheme needed roughly four more months of work and then a sales period, and the money to pay for it was about to be called in.

Every year we see at least one scheme in exactly this position, and it is almost never the developer's competence that put it there. Contractors fail. Programmes slip. The facility term was set eighteen months earlier against a programme that no longer exists, and the lender's patience runs out on a date that has nothing to do with where the scheme actually is.

Why the incumbent could not simply extend

People assume the incumbent lender is the natural home for more time, and sometimes they are, but a development lender at the end of its appetite is pricing its own exposure rather than your scheme. The extension already granted carried a fee and a rate step-up, a second one would have carried more of both, and expired facilities drift toward default pricing, which is where the real damage happens. The incumbent had also stopped releasing drawdowns at expiry, so the remaining works were being cashflowed out of the partners' own pockets.

The high street was never in the conversation. Part-built schemes frighten most lenders. A clearing bank cannot price a site with scaffolding on it, and even many specialist development lenders prefer to start schemes rather than rescue them, because the cost to complete someone else's build carries unknowns their credit process does not like. The lenders who write finish and exit facilities do this deliberately, and they underwrite the two things that matter: the true cost to complete, and the realism of the sales values.

My advice to any developer watching their term run down is to start the refinance conversation at least three months before expiry, not when the extension letter arrives, because a finish and exit facility takes five to seven weeks to complete and every week of overlap with an expired facility is charged at the incumbent's worst pricing.

The structure

The facility completed at £1.75 million against a GDV of £2.9 million, 60% LTGDV. Around £1.36 million redeemed the incumbent facility in full, roughly £270,000 funded the remaining works drawn against certificates, and the balance covered rolled interest and fees so the partners carried no monthly outgoing through the works and the sales period. Pricing on finish and exit money sits closer to bridging than to senior development finance, and this facility priced just under 1% per month with an arrangement fee in the standard 1% to 2% range.

The lender's QS reviewed the cost to complete before credit approval, and this is the part developers underestimate. What we have seen across the stalled schemes we have refinanced is that the developer's own cost-to-complete figure is always light, because it never carries enough contingency for opening up another contractor's work, so the QS built a contingency on top of the £270,000 and the facility was sized to carry it. Better to have the headroom and not draw it.

The 14-month term was structured as four months of works plus a ten-month sales runway across seven units. Release pricing was agreed on day one, with each sale clearing slightly more than that unit's share of the debt, so the balance falls ahead of pro rata as the scheme sells through.

How it completed

The partners came to us two weeks before the extended expiry date, which was later than ideal and cost them a period of default-rate interest with the incumbent. First call to credit-approved terms took eight working days. The valuation ran as a dual assessment, current value as standing plus GDV on completion, and the QS report on the cost to complete ran concurrently over the following fortnight. Legals took three weeks, with the incumbent's redemption statement and the replacement contractor's collateral warranties the only points of friction. Completion came just under six weeks from first call.

The incumbent was repaid in full. The replacement contractor remobilised within a week of completion, drawdowns on the remaining works ran fortnightly against certificates, and practical completion landed three weeks inside the four-month works window. The first two units went under offer while the show home was still being carpeted, which tells you what we already knew about family-house demand on the edge of Taunton.