For property developers, the focus is often on getting the scheme out of the ground. Securing planning, managing contractors, and keeping to budget are complex enough without worrying about what happens twelve or eighteen months down the line. Yet time and again, projects that run smoothly during construction falter at the very last stage — repayment of the finance.
As we explored in Why Every Bridging Loan Needs a Clear Exit Strategy, a development loan is only ever as strong as its repayment plan. In Development Finance Exits Explained: The Borrower’s Guide, we looked at the mechanics of structuring exits. And in The Cost of a Failed Exit: Penalties, Defaults, and Lost Opportunities, we saw the consequences when things go wrong. This article now turns to the practical reality: the most common pitfalls developers face when planning exits — and how to avoid them.
Perhaps the most frequent mistake is overestimating GDV. Developers, understandably optimistic about the quality and appeal of their projects, may assume sales values that outstrip local demand. Lenders, however, apply their own discounts and comparables. A scheme projected to sell for £10 million may be underwritten at £8.5 million once the lender factors in market realities.
The pitfall is not just academic. A lower GDV means reduced leverage, lower loan-to-cost ratios, and potentially the need for additional equity. Worse still, if the project reaches completion and fails to achieve the expected values, the exit collapses.
The solution is realism. Developers should base GDV on multiple comparables, assume conservative pricing, and stress-test returns. As we highlighted in Why Exit Risk Keeps Lenders Awake at Night, lenders care more about credible, conservative exits than optimistic projections.
Another recurring problem is the underestimation of timelines. Developers often assume that once construction is complete, repayment will follow swiftly. In reality, marketing campaigns, buyer mortgage approvals, and legal completions can take months.
A project that finishes on site in December may not deliver sales proceeds until the following spring. If the finance facility matures before those funds are realised, the borrower is forced into costly extensions or even default.
The solution is to align facility terms with realistic timelines — not just for construction, but for marketing and legal completion. Conservative allowances protect against seasonal slowdowns, delays in mortgage approvals, or sluggish buyer demand.
Many developers plan to refinance onto longer-term facilities, particularly when retaining part of the scheme for rental yield. But assumptions about refinance can be fragile. Stress tests applied by buy-to-let lenders are now far stricter, and what seemed affordable on paper may collapse under lender scrutiny.
Rental yields must be high enough to meet current affordability ratios, and these ratios shift with interest rates. A plan that worked when stress tests assumed 5% may no longer hold if lenders apply 7%. We explored this risk in Bridging to Mortgage: How to Transition Smoothly in 2025, where timing and affordability challenges often derail exits.
The solution is to test refinance assumptions with live lender criteria before the development loan completes. By doing so, borrowers ensure that their exit is not just theoretical, but genuinely achievable.
Exits fail most often when developers rely on a single strategy with no fallback. A borrower who plans only to sell units, without considering what happens if sales slow, leaves the lender exposed. Similarly, those planning only to refinance without accounting for possible valuation shortfalls risk funding gaps at the eleventh hour.
Contingency planning — part-sales, alternative refinance options, or even secondary charges — can make the difference between a successful exit and a default. As highlighted in The Cost of a Failed Exit, flexibility is the antidote to failure.
One often overlooked pitfall is the failure to plan for cash flow between practical completion and exit realisation. Servicing finance costs, paying agents’ fees, and covering marketing expenses all require liquidity. If the borrower has tied up all capital in construction, they may struggle to sustain the project during the critical exit phase.
This is particularly acute when sales drag or refinance takes longer than expected. Default interest begins to accrue, not because the project is unprofitable, but because the borrower lacks the liquidity to bridge the gap.
Developers who plan cash flow buffers — whether through retained profits, secondary facilities, or partner equity — are far better positioned to withstand these pressures.
Finally, many pitfalls are not technical but behavioural. Developers who have completed successful projects before may assume exits will always fall into place. They delay refinance applications, launch marketing later than planned, or stretch GDV assumptions because “it worked last time.”
The reality is that markets change quickly. Lending criteria in 2025 are not the same as in 2022. Rental stress tests are tougher, buyer affordability is tighter, and lenders are more conservative. Overconfidence blinds borrowers to these shifts, and the result is failed exits that could have been avoided.
In late 2023, a mid-sized developer completed a 20-unit scheme in the South East. The plan was to sell 15 units and refinance the remaining five onto a portfolio mortgage. The GDV assumed £7.5 million, but actual valuations came in at £6.8 million. Meanwhile, rental stress tests tightened, and the portfolio refinance that had seemed straightforward was no longer viable.
The developer faced a funding gap of nearly £500,000 and was forced into a high-cost extension. Profit margins were eroded, and lender confidence was shaken. The lesson was stark: assumptions are not enough. Conservative valuations, stress-tested refinance, and contingency planning would have prevented the crisis.
Avoiding these pitfalls requires a disciplined, professional approach. Developers should:
By following these principles, developers transform exit planning from a vulnerability into a source of strength.
At Willow Private Finance, we specialise in helping developers avoid the traps that derail exits. Our role is not simply to arrange finance, but to stress-test repayment strategies, anticipate lender concerns, and build resilience into every deal.
In one recent case, we worked with a developer whose refinance plan was marginal under buy-to-let criteria. By identifying the issue before the loan was agreed, we restructured the facility and engaged an alternative lender. The result was a seamless exit, with the project delivered on time and profit preserved.
In another, we advised a borrower to adjust GDV assumptions downward before submitting to lenders. While this reduced leverage initially, it built credibility with lenders and avoided disappointment later. The project was funded on stronger terms because the exit risk was lower.
For developers, this is the value of experienced guidance: not just securing today’s facility, but safeguarding tomorrow’s profitability.
Book a free strategy call with one of our mortgage specialists.
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About the Author — Wesley Ranger
Wesley Ranger is the Founder and Director of Willow Private Finance. Over his career, he has helped countless developers avoid costly mistakes around GDV assumptions, refinance timing, and liquidity gaps. Wesley’s approach blends lender insight with developer pragmatism, ensuring clients sidestep pitfalls and deliver profitable exits.
Important Notice:
This article is for information purposes only and does not constitute financial advice. Property finance carries risk, including the risk of default or repossession if loans are not repaid. Exit strategies should be assessed carefully and tailored to individual circumstances. Always seek professional advice before entering into any finance agreement. Willow Private Finance is directly authorised and regulated by the Financial Conduct Authority (FRN: 588422).
