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Date: 17 November 2023

Author: Chris Sheppard

In a property market that’s lost its former pace, developers are finding themselves in a precarious position. The homes are built, yet the buyers aren’t biting as quickly as they once did. As Associate Director of Underwriting at MSP Capital, I’ve seen first-hand the impact a slowing market can have on developers eager to move onto their next venture.

The completion of a development project is an exhilarating milestone, but it’s also the start of a critical race against time. Every day that a sale is delayed, holding costs chip away at the potential profit and you lose out on future opportunities. In a robust market, this isn’t much of a concern. However, when the market shows signs of lethargy, this is where a Development Exit Loan can become your strategic advantage.

Let’s talk about liquidity

It’s the lifeblood of your business operations. When your capital is tied up in a development that isn’t selling, your ability to jump on new opportunities diminishes. You may also face the pressure of existing development loan terms coming to an end. This is more than just a cash flow problem—it’s a growth bottleneck.

A Development Exit Loan is designed to free you from these constraints. It’s a bridge between your project’s completion and its eventual sale, potentially offering more favourable terms than a development loan.

Here’s how a Development Exit Loan can help:

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Extended Timeframe

With a Development Exit Loan, you have the breathing room to wait for a buyer who meets your price expectations rather than rushing into a sale at a lower price point.

Flexibility to move forward

By freeing up equity that’s tied up in completed stock, you are able to have the liquidity to move forward on another opportunity as soon as it presents itself.

Additional Borrowing

If your project has increased in value since the original development loan was taken out, a Development Exit Loan could potentially provide additional borrowing against this increased value.

Reduced Pressure

Selling under pressure can lead to poor decision-making. With a Development Exit Loan, the immediate financial pressure is lifted, giving you the space to market the property effectively.

Preserved Credit Profile

By securing timely financing and avoiding defaults or late payments on existing loans, your credit profile remains intact, positioning you favourably for future projects.

Keep moving forward

At MSP Capital, we understand that your reputation as a developer is built on your ability to deliver and move on to the next project with minimal fuss. It’s about maintaining momentum. The Development Exit Loan is your secret weapon to ensure that market slowdowns don’t translate into business slowdowns.

In a perfect world, every development would sell promptly at the asking price, but the reality is often different. By planning for every eventuality and having a financial buffer like a Development Exit Loan, you’re not just protecting your current project; you’re safeguarding your future in the industry.

To conclude, while we can’t control the market, we can manage our response to it. Development Exit Loans offer a way to do just that, turning potential financial strain into a strategic pause, allowing you to wait out the market’s fluctuations without sacrificing your business’s fluidity or future.

If you’re feeling the weight of a slowing market, let’s talk about how a Development Exit Loan can keep your projects—and your business—moving forward.

Chris Sheppard has nearly 30 years of finance experience

chris sheppard

To speak with Chris or another expert about a bridging or development loan, simply fill in the form.

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