Guide
How development exit finance is priced, line by line
Updated
Borrowers compare this product on its headline rate, and the headline rate is rarely where the money is. A facility is a margin, a set of fees and an interest treatment, and the last of those three quietly changes how much cash you actually receive.
Margin over what
Facilities are usually quoted as a margin over a base. The Bank of England's Bank Rate has been 3.75% since 18 December 2025, having been 4.00% from August 2025 and 4.25% from May 2025.
Ask whether your margin sits over Bank Rate or over the lender's own cost of funds, because the two behave differently when rates move. A margin over an internal cost of funds is not something you can track independently.
The fee that is easiest to misread
An exit fee charged as a percentage of the loan and an exit fee charged as a percentage of gross development value are different products wearing the same label. On a scheme where GDV materially exceeds the facility, the second is a much larger number.
Both structures exist and neither is improper. What matters is that the quote says which, in writing, before you compare it with anything else.
Retained interest and your net advance
Where interest is retained, the lender holds back several months of it from the advance. The facility might be described as one figure while the money reaching your account is meaningfully less.
That is not a trick and it is standard in short-term lending, but it means the headline facility size and your usable cash are different numbers. Ask how many months are retained and what happens to unused retained interest if you redeem early.
Compare on total cost to redemption
Build one number for each quote: arrangement fee, plus interest over your realistic term, plus exit fee, plus broker fee, plus legal and valuation costs. Then compare those.
Use a realistic term rather than the one you hope for. If the sales programme is twelve months and you price a six month facility, you are comparing quotes on an assumption you have already decided is optimistic, and the extension fee is the line that will find you.