Fund the build — from the slab to settlement.

What is construction & development finance?

Development finance is its own discipline — lenders assess the project, not just the borrower, and how the facility is structured against your build program matters as much as the rate.

It funds the building or developing of property, from a dual-occ or a handful of townhouses to commercial and mixed-use projects. Because the money pays for work as it happens, the facility is drawn down in stages rather than handed over at once — and approval hinges on feasibility, presales or lease covenants, builder credentials and a clear exit. We package your project for the lenders whose appetite actually fits it, instead of a scattergun of applications that collect knock-backs.

The mental shift that catches most first-time developers is this: a construction lender is not really lending against a property, because at the point of approval the property doesn't exist. It is lending against a plan — a set of costings, a program, a builder, a contract and an end value — and everything unusual about the product follows from that. The staged drawdowns exist because the security is built rather than bought. The independent inspections exist because the lender has to confirm the security is appearing as promised. The short term exists because the facility is a bridge to a finished asset, not a way to hold one. Understand that and the rest of the process stops feeling arbitrary.

How it differs from a standard commercial loan

Plenty of borrowers arrive expecting development finance to behave like the commercial loan they've had before, and it doesn't. The differences are structural, not cosmetic.

The most consequential line in that table is the last one. A standard facility winds itself down; a construction facility has to be actively cleared at the end, which is why the exit is assessed as hard as the build. Interest is also handled differently in practice — because the project isn't earning during construction, development lenders will often capitalise interest, adding it to the balance rather than requiring cash payments while you build. That protects your cash flow, but it is not free money: capitalised interest consumes part of your approved facility, so it has to be included in the feasibility from the outset.

If your project is a purchase, a refinance or a value-add on a property that already exists, the product you want is commercial property finance rather than a development facility — and if it's a purchase now with a build to follow, the two are often sequenced deliberately.

What we finance

• Residential development — dual-occ, townhouses, small-to-medium unit projects.
• Commercial & industrial — owner-occupied builds and commercial development.
• Mixed-use — combined residential and commercial projects.
• Owner-builder & construction — progress-drawn funding for the build itself.
• Land acquisition with a build to follow — sequenced so the site purchase doesn't strand the project.

How drawdowns work — and how the builder gets paid

Rather than one lump sum, the facility is released in stages against your build program — and you typically pay interest only on the funds drawn so far, keeping holding costs down while work is underway.

The stages are the easy part. What developers underestimate is the machinery between a stage being finished and the money arriving. Each drawdown runs the same loop: your builder issues a progress claim for the stage just completed; the lender has it independently verified — typically by a quantity surveyor on larger projects, or a valuer on smaller residential ones — who confirms the claimed work has actually been done and, just as importantly, that the funds still remaining are enough to finish the build; the lender then releases the drawdown, usually paying the builder directly or reimbursing you against the claim.

That "cost to complete" test is the one that surprises people. A lender will not keep releasing money into a project it believes can no longer be finished within the approved facility, so a variation or a cost blowout early in the build can affect drawdowns much later. The two habits that prevent trouble are keeping a genuine contingency inside the feasibility rather than on top of it, and telling the lender about variations as they happen instead of at the next claim. Our detailed walk-through of construction loan drawdowns and progress payments covers the sequence claim by claim.

We structure drawdowns so they line up with your builder's payment schedule — no funding gaps mid-build.

Who lends on construction & development

Development lending in Australia runs in tiers, and knowing which tier your project belongs to is most of the battle. We don't publish named panels or their criteria — appetite changes constantly and a stale list helps nobody — but the shape of the market is stable.

• Major and second-tier banks — the conventional end. Strongest for experienced borrowers, standard project types and conservative leverage, and typically the cheapest cost of funds. On residential development they generally want presales, and their credit processes are the slowest.
• Non-bank and specialist development funders — more leverage, more flexibility on presales and project type, and materially faster decisions, at a higher cost. This tier funds a large share of small-to-medium Australian development.
• Private credit and mortgage funds — for deals that don't fit the tiers above: unusual sites, compressed timeframes, higher leverage, or a borrower whose track record is still being built. Fastest and most expensive, and entirely rational where the cost of delay exceeds the cost of funds.

The choice is rarely about finding the cheapest quote. A cheap facility that takes four months to approve and requires presales you can't achieve is worse than a dearer one that settles on your program — holding costs and lost time are real money. The right question is which tier your project genuinely fits, and that is the read we give you before anything is lodged.

The approval gates

A development application is assessed against a series of gates. Any one of them can stop a deal, and they're tested roughly in this order.

• Feasibility — the numbers. Land cost, construction cost, professional fees, finance costs, contingency, selling costs, GST, and the projected end value. A feasibility with no contingency, or one where the profit margin is too thin to absorb a normal overrun, fails here regardless of how good the site is.
• Leverage — how much of the project the lender will fund, tested against cost and against end value at the same time. The tightest test governs. See the FAQ below on what LVR, LTC and LTGR each measure.
• Presales or pre-commitment — for residential, unconditional presales; for commercial, signed leases or a pre-committed tenant. This is where bank and non-bank appetite differs most sharply, and it is the single most common reason a project moves tiers.
• The builder and the contract — licensing, financial capacity, track record on comparable projects, and a contract the lender can rely on. Contract type matters: a fixed-price contract transfers cost risk to the builder and reads much better to a lender than an open cost-plus arrangement, which is worth understanding before you sign — see fixed-price vs cost-plus contracts.
• Planning and approvals — a development approval in place, or a clear, dated path to one. Conditions attached to a DA can change the costings, so lenders read them.
• Your experience and equity — what you've delivered before, and how much of your own capital is genuinely in the deal. First-time developers are funded, but usually at lower leverage and with a stronger builder required.
• The exit — assessed last and weighted heavily. Covered below.

The percentages behind the leverage and presale gates vary widely by lender, project type and borrower, so we won't state figures that would be wrong for most readers. Our guide to presales and LVR requirements in development finance works through how those tests are set and where there's room to move.

Costs, feasibility & what drives pricing

Development lending is priced on risk and project quality. What moves it:

• Project type & scale — residential, commercial or mixed-use, and the number of dwellings.
• Leverage — against total development cost or gross realisation.
• Presales or lease covenants — de-risking the exit for the lender.
• Experience & builder — your track record and a credible, well-contracted builder.
• Exit strategy — sale or refinance to a term facility on completion.
• Term & program — a longer build is more exposure, and time is priced.

The interest rate is only part of the cost, and on development deals it's often not the part that decides between offers. A facility will typically also carry an establishment or line fee on the approved limit, the cost of the quantity surveyor's initial report and each subsequent inspection, valuation fees, legal and documentation costs on both sides, and — where the project runs past its term — extension fees. Because interest is usually capitalised, all of it has to be funded inside the facility, which means every dollar of cost is a dollar of leverage not available for construction.

That's why the feasibility is the real document under assessment, not the application form. It has to carry a contingency that reflects the project's actual risk, finance costs modelled on the drawdown profile rather than the full limit, and an end value a valuer will support. Our breakdown of construction finance costs and feasibility sets out what belongs in one and the omissions that most often sink an application.

Any figures on this page are indicative only and do not constitute a formal finance offer or approval.

The exit — how the facility gets repaid

Construction finance is short-term by design, so the question of how it ends is settled before it begins. There are two credible answers, and lenders want yours in writing at application.

Sell. The completed stock — or the whole asset — is sold and the facility repaid from the proceeds. Presales feed straight into this: unconditional contracts on completed dwellings are the cleanest possible evidence that the exit works, which is exactly why lenders value them so highly. What gets tested here is the sales program's realism, since settlement timing on off-the-plan stock rarely matches the day the build finishes.

Refinance and hold. The balance is refinanced into a standard term facility and the completed property is retained — for owner-occupied commercial builds and for investors holding the finished asset, this is the usual path. The test is whether the completed property will actually service a term loan on the lender's assessment, using lease income or business income. That's a commercial property finance conversation, and it is worth having before the construction facility settles rather than in the last month of the build. We line the two up so the take-out facility is understood at the start, not scrambled for at the end.

What lenders assess

A development lender is funding a project's completion, so they want feasibility that stacks up, a sensible leverage position, a credible builder and contract, and a clear exit. Present those well and the deal moves; present them poorly and it stalls. We frame the feasibility, program and exit the way each lender wants to see it before anything is lodged.

Practically, that means arriving with the pack rather than assembling it under pressure: the feasibility model, the DA and its conditions, the build contract and program, the builder's credentials and insurances, evidence of your equity contribution, any presale contracts or lease pre-commitments, and your own track record set out properly. Deals slow down over missing documents far more often than they fail on credit. Start with the free eligibility check for an early read on where your project sits, and a broker will tell you which gate is likely to bite before you spend money proving it.

General information only, prepared without regard to your objectives, financial situation or needs. It is not personal advice or a recommendation to enter any particular finance product.