Property Development Finance
Funding for your residential or commercial property development projects
Property Development Finance is a type of commercial finance that is specifically for residential or commercial development projects. They are usually interest only loans with a draw down facility allowing the developer to draw the project funds as they are needed.
As a short-term lending solution, they are usually for no more than 6-24 months depending on the size and type of the project.
The type of lender you chose will depend on many different aspects of your development project:
- Your level of experience as a developer
- Your profit margin
- Your Proven Track record, the number of similar projects you have completed successfully
- Whether you have any presales
- The amount of Equity you have raised for the project
- Whether you are working with investors or joint venture partners
- Your property development business financials
- Your personal Assets and Liabilities
- The type and location of the project
- Whether you require all the funds up front
- Whether you have a DA Approval
Whether you are a seasoned property developer or you are looking into starting your first development, our commercial finance specialists can provide a tailored Finance Solution to meet your project requirements.
Give us a call today to discuss your development project finance options.
Traditional Bank Lenders
A Property Development Loan from a Bank usually requires the applicant to prove that they have the ability to repay the loan. A borrowers income and expenses will be checked thoroughly and they will need to provide full documentation usually including 3 years of Financials, tax portal statements as well as a full statement of position listing all assets and liabilities of all the directors of the entity borrowing the funds.
In addition to all the standard information required about the project, the Borrower will be expected to show a proven track record of previous projects they have completed successfully. They will need to demonstrate evidence of presales, often at least 50%.
On the plus side the interest rates from a Bank will be cheaper than a non-confirming lender or private lending.
As there is a large emphasis on serviceability these types of loans can take quite a while to be approved so if you are looking for funding for a large project its best to start talking to your broker as soon as possible to start the process early and allow enough time for the bank to complete their assessment and provide the finds.
Banks will usually appoint a Quantity Surveyor to assess the project at every stage before releasing the funds to be drawn down. If you require more control over funds for your project this would not be the best solution for you.
As non-conforming lenders are not restricted by the same regulations as major lenders their loans are a lot easier to apply for and get approved. Unlike a major lender who will require full documentation, a non-conforming lender has full doc and low doc options available. Depending on the strength of your feasibility and the project they also may not require presales.
Although non-conforming lenders charge a higher interest rate they are a great option for a developer who has a profitable project but either has no time to wait for a major banks assessment or they cannot fit the criteria of a major Bank lender.
Private Lenders charge higher interest rates than the major banks and non-conforming lenders, but they provide far more flexibility for property developers. They have a much quicker and easier loan assessment; they can be capitalised, and the funds are available to the developer without requiring approval from a Quantity Surveyor at each stage.
Unlike bank lenders, private lenders assessment of a property development project is based on the strength of the project rather than the serviceability and assets of the borrowers. Rather than requiring full documentation they require a good feasibility and information memorandum describing the project and demonstrating its profitability.
So what are some of the advantages of Private Lending that make it a popular choice for developers?
- Quick approval turnaround
- Funds are available as needed
- Lending on GRV or TDC
- Interest can be capitalised
- Minimal documentation
- Little or no presales are required
- Smaller equity deposit is needed
- Previous experience on similar property development projects is not required
Want to know more about Private Lending? Contact us to discuss your funding requirements.
We can assist you with the following types of Property Development Finance:
- Commercial property loans
- Zero Presales Finance Solutions
- GRV Based Low Doc Loans
- Mezzanine Finance
- Residual Stock Loans
- Funding for Subdivisions
- Funding for Joint Venture Projects
- Finance for Land banking
- Loans for Incomplete or partially completed developments