The repayment of a development finance loan is typically repayable within 12 – 36 months. It depends on the size of your project. The quicker the better from a developer point of view because you will save money on the interest accumulated on the finance arrangement. When applying for the development finance the lender will assess your ‘exit strategy’. As a Broker we would discuss this with you at great length and consider 2-3 different exit ideas.

Typically, repayment of a development finance loan occurs under one of the following structures:

Interest-Only Payments: It isn’t hugely common but it is popular with developers that they have the option to service the principal debt i.e. make repayments to the debt as and when they can to slow down the accumulation of interest on the credit agreement. You wouldn’t just rely on this but if you are able to do it then you can pay the debt back faster and save yourself alot of money, thus improving your profit margins on your development project.

Refinancing or Sale of the Property: As a Developer/builder you might choose to refinance the development finance debt. This would be an option if you intend to keep the developed properties for your own residential occupancy or for rental investments. Or you would sell the developed property(s) to repay the loan amount. This is the most popular exit strategy when repaying your development finance or bridging finance loan.

It’s itally important to thoroughly review the terms and conditions of the loan agreement before accepting development finance. If the project overruns then their could be financial consequences that cost you dearly. Contrary to popular belief the lenders will do their best to find a sensible financial solution instead of stictching you up. If it hurts you, it would hurt them also. Communication is key with projects not running to the schedcule you set.

As a commercial and development finance spcialist, we have been in this game for so long that we know based on our initial discussions with you whether there may be potential delays. Our honest approach to finance will always be there to protect you and your profit margins and in essence, any potential assets you may be putting up as collateral security for the lending. So, with this in mind we will thoroughly vet your project, look at the timescales you believe they will be completed within, check this against the market and economic climate and give you a best and worst case scenario so you are prepared. In our experience, having projects that can comfortably turned around within 12-18 months are ideal because if they overrun they often have a surplus you can fall back on from a profit perspective and the specialist finance mortgage companies are more flexibile with their extension of terms.

For more information on this subject or any other blog content we have provided, please feel welcome to contact our knowedgeable and experienced advising team on 0117 251 0563.