How to exit a land bridge onto development finance once your planning consent is in place

A land bridge is a short-term facility, usually running from 1 to 36 months with interest rolled up rather than serviced monthly. Because there is no income from the land during that period, the whole facility, interest and fees included, has to be repaid in one go at the end. The event that repays it is the exit, and without a credible one, the loan cannot responsibly be made.

This is why a lender assesses the exit as closely as it assesses the security. It wants to see a realistic, evidenced route to repayment, whether that is a refinance, a sale, or a longer term facility. A vague plan to sort something out later is not an exit, and it is the fastest way to see a facility declined.

The exit also shapes the term. If the plan is to refinance onto development finance once consent is discharged, the bridge needs enough term to reach that point with margin to spare. Rolled up interest keeps building for the whole term, so an overrun is expensive as well as risky. Planning the exit is therefore not paperwork, it is what makes the facility work.

The classic exit for a developer is to replace the land bridge with a development finance facility once the site is ready to build. In simple terms, the development lender advances a new, larger facility that repays the land bridge in full, including its rolled up interest and fees, and then funds the construction in stages.

Development finance is structured differently from a land bridge. It typically covers a proportion of the land value plus a large share of the build costs, drawn down in stages against certified progress on site, and it is sized against the scheme's gross development value. Interest is usually rolled up and repaid when the finished units are sold or the scheme is refinanced onto longer term debt.

The handover is the key moment. The land bridge is repaid from the first drawdown of the development facility, so the two need to dovetail cleanly. We arrange this so that the development finance is agreed and ready to draw before the land bridge reaches its end, which avoids a gap that could leave the site unfunded or the bridge in overrun.

A development lender is funding construction, so it looks at a different set of questions from a land lender. Above all, it wants certainty that the scheme can actually be built and sold. Three things sit at the centre of that.

• Planning consent: usually full detailed permission, with reserved matters discharged and any pre-commencement conditions understood, so the scheme can start on site.
• A costed build: a realistic construction budget, often supported by a fixed price or a properly tendered contract, and frequently reviewed by a monitoring surveyor.
• A gross development value: a supportable valuation of the finished scheme, which sets the ceiling for the total facility and underpins the exit.

Beyond those three, a lender will look at the developer's experience, the professional team, the sales or letting strategy, and the exit from the development finance itself, whether that is unit sales or a longer term refinance. The stronger and more complete this picture, the keener the terms, with well evidenced schemes moving towards senior debt from around 6% to 8% a year. These are indicative bands, and every scheme is judged on its own facts.

Timing is where good deals are protected and poor ones come unstuck. The risk is simple: the land bridge reaches the end of its term before the development finance is ready to draw, leaving the borrower exposed to overrun costs, extension fees, or worse. Avoiding that is a matter of working backwards from the drawdown date.

We plan the term of the land bridge to cover not just the grant of consent, but the discharge of reserved matters and pre-commencement conditions, plus the time it takes a development lender to underwrite, value and issue funds. Development finance is not instant: valuations, quantity surveyor reports and legal work all take time, so the application should start well before the bridge matures.

Building in a sensible buffer matters, because rolled up interest keeps accruing and planning steps often slip. A land bridge that looked comfortable on paper can tighten quickly if reserved matters take longer than hoped. By starting the development finance process early and keeping a margin at the end of the bridge, the handover happens with room to spare rather than under pressure.

Refinancing onto development finance is the natural exit for a developer who intends to build, but it is not the only one, and it is wise to keep more than one route open.

The most common alternative is a sale of the consented site. Once planning has crystallised the uplift, the land is worth considerably more than it was, and selling the shovel-ready site to another developer or a housebuilder repays the bridge and banks the gain without taking on build risk. This suits a promoter or investor whose plan was always to add value through planning rather than to construct.

Another route is a longer term facility, where the plan is to hold the consented land rather than build or sell immediately, perhaps refinancing the short-term bridge onto a longer land loan while the next steps are settled. Each alternative has different costs and timescales, and the right one depends on your intentions for the site. What matters is that at least one credible exit is in place, and ideally a fallback, before the facility starts.

The best time to plan the exit is before the land bridge is even drawn, not as the term runs down. The exit determines the term you need, the pricing, and often whether a lender will lend at all, so it belongs at the front of the conversation rather than the end.

Planning early lets us structure the whole journey as one path: raise the land bridge against current value, secure and discharge the consent to crystallise the uplift, then hand over cleanly to development finance, a sale, or a longer term facility. Each stage is set up with the next in mind, so the numbers and the timelines join up.

It also means the fallbacks are ready if the primary route slows down. If reserved matters drag or a development lender's underwriting takes longer than expected, a pre-considered sale or extension can prevent a problem becoming a crisis. Planning gain and land finance for companies, developers, promoters and investors is unregulated commercial lending outside the FCA's regulated-mortgage perimeter, and nothing here is financial, legal, planning or tax advice. Bring us the site and your intentions early, and we will map the exit before the clock starts.