Tobe - the lenders I am talking about are private funders - they don't go through the same 'scoring' or procedures as banks. They are far more flexible. You can PM me for more details if you would like.
Tobe,
I know a broker who is able to help your friend in this situation by providing either a) a second mortgage on the development or b) refinancing the entire development.
Done it before for a client who was facing exactly the same situation.