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Development Finance
Development loans for Perth subdivisions, unit and apartment projects, and commercial builds. We structure the deal and take it to the lenders actually funding development right now, not the ones who stopped two years ago.
- Founded by two former bankers
- Commercial and business finance specialists
- Perth based, working Australia wide
- MFAA member
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0483 292 005Lenders fund the project, not just the borrower
This is the part that catches people coming from a residential background. On a home loan, the lender is assessing you. On a development loan, the lender is assessing the deal: the feasibility, what it costs to deliver, what the finished stock is worth, how long it takes, who is building it, and how the debt gets repaid at the end. Your personal position matters, but it is one input among many, and it is rarely the one that decides the answer.
That difference is why a developer can have strong financials and still get knocked back, and why a project the bank declined can be perfectly fundable somewhere else. We spent years in commercial banking putting exactly these deals in front of credit. We know what a credit paper needs to contain before it gets to a decision, and we know where the appetite currently sits.
What we fund
- Residential land subdivisions, from small infill splits through to staged englobo projects
- Townhouse, unit and apartment developments, held or built to sell
- Commercial and industrial development, including design and construct for an incoming tenant
- Land bank and pre-development facilities while approvals are being worked through
- Residual stock loans to refinance completed unsold dwellings off an expiring facility
- Construction facilities for developers, distinct from a standard residential construction loan
- Refinance or restructure of an existing development facility, including where a project has run past its program
What a lender actually tests
Development credit runs on a handful of measures, and knowing them before you approach anyone changes how the conversation goes.
Loan to cost as well as loan to value. Residential lending revolves around loan to value ratio. Development lending adds loan to cost ratio, comparing the facility to the full cost of delivering the project: land, construction, professional fees, council contributions, holding costs and contingency. Your deal is tested against both, and the tighter of the two sets the limit. A project that looks comfortable on end value can still be short on a cost basis, and that shortfall becomes equity you have to find from somewhere.
The feasibility, line by line. A lender's credit team reads a feasibility looking for what has been left out. Realistic construction costings rather than an optimistic square metre rate, a genuine contingency, holding costs across the true program rather than the hoped-for one, selling costs, and end values supported by comparable evidence rather than by the developer's expectations. Thin feasibilities are the single most common reason a workable project reads as unfundable.
Pre-sales, where the lender requires them. Pre-sale appetite is one of the biggest points of difference between lenders in this market, and it moves with conditions. Some want qualified pre-sales in place before funding construction, some will assess a project without them, and what applies to your deal depends on size, location, exit and track record. Knowing which lenders will currently fund without pre-sales, and what that costs against a pre-sold structure, directly changes what you can take on.
Track record and the build team. Lenders treat delivery risk as real risk. Who has run a project like this before, who is building it, whether the builder is financially sound, and whether the program is achievable. On a first development this is the area that needs the most support, and it is usually solvable.
The exit. Development debt is short term and expires on a date. The lender wants to see how it gets repaid, whether that is settlement of sales as stock clears or a refinance onto a term facility if you intend to hold. An exit that only works if everything sells quickly at full price is an exit a credit team will discount.
Where development deals fall over
Most of the projects we see stall for reasons that had nothing to do with the site. The developer went to their own bank first, got a no, and read it as a verdict on the project rather than a statement about that bank's appetite for development lending. Major banks have limited and shifting appetite here. A large part of the market is funded by specialist and non-bank lenders whose terms, pricing and pre-sale requirements differ enormously from each other.
The other common failure is timing. Approaching a lender after the land is under contract with a short settlement, with the feasibility half built and no quantity surveyor engaged, leaves no room to structure anything. Development finance takes longer to assess than any other lending we place. The work we do before the application, getting the feasibility credit ready and matching the deal to lenders with current appetite, is what determines the terms you get offered.
If your project has a commercial property component or you are buying premises to occupy, that sits alongside this on our commercial property finance page, and broader business lending is covered under commercial finance.
Frequently asked questions
What is development finance and how is it different from a construction loan?
A residential construction loan funds an owner or investor building a single dwelling, and it is assessed mostly on the borrower: income, existing debt, and the value of the finished home. Development finance funds a project built to sell or to hold as an income asset, and it is assessed mostly on the project. The lender is looking at the feasibility, the total development cost, what the finished stock is worth, how the debt gets repaid, and whether the people running the project have done it before. Two borrowers with identical personal financials can get completely different answers on the same site, because the deal is being credit assessed, not just the applicant.
Do I need pre-sales to get a development loan in Perth?
It depends entirely on the lender and the shape of the deal. Pre-sale requirements are one of the biggest points of difference between lenders in this market. Some require a level of qualified pre-sales before they will fund construction, some will look at a project on its merits without them, and the answer often changes with the project size, the location, the exit strategy and the developer track record. This is one of the main reasons developers approach us before committing to a site: knowing which lenders in the current market will fund your project without pre-sales, and what that costs against a pre-sold structure, changes what you can realistically take on.
What is loan to cost ratio and why does it matter for a development loan?
Residential lending revolves around loan to value ratio, which compares the loan to what the property is worth. Development lending adds loan to cost ratio, which compares the loan to what the project actually costs to deliver: land, construction, professional fees, council contributions, holding costs and contingency. A lender will test your deal against both, and the tighter of the two sets your funding limit. Developers are often caught out here, because a project that looks well covered on end value can still be short on a cost basis, and that gap becomes equity you have to find.
Can a first-time developer get development finance?
Yes, though the path is narrower and how the deal is presented matters more. Lenders assess developer track record as a genuine risk factor, so a first project needs to compensate elsewhere: a solid feasibility, a builder with a real track record, a realistic program, clear equity, and a credible exit. Bringing in an experienced project manager or partnering on the first deal is common and is viewed favourably. The mistake first-time developers make is approaching their existing bank, getting a no, and concluding the project is not fundable. Most major banks have limited appetite in this space regardless of who is asking.
How does a development loan get drawn down and repaid?
Development facilities are drawn progressively rather than in one advance. Draws are typically released against certified progress, with a quantity surveyor engaged by the lender verifying the work in place and the cost to complete before each release. Interest is commonly capitalised into the facility during the build rather than serviced monthly, which is why the interest allowance sits inside the total development cost. Repayment comes from the exit: settlement of sales as stock is sold, or a refinance onto a term facility if the plan is to hold the completed asset. Lenders assess that exit at the start, because it is how they get repaid.
What is a residual stock loan?
A residual stock loan refinances the unsold units left at the end of a project once the development facility falls due. Development debt is short term and expires on a fixed date, but the last few units in a project often take longer to sell than the program allowed for. A residual stock facility takes those completed unsold dwellings onto a longer term loan, which takes the deadline pressure off and stops a developer discounting good stock simply to clear a maturing facility. Arranging it before the development facility expires is considerably easier than arranging it after.
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Book a meeting or make an enquiry. We'll tell you whether it's fundable, how we'd structure it, and which lender we'd take it to. No obligation.