Commercial Development Loans from $500k to $100m+

A property development finance loan is a specialised lending solution designed to fund the purchase of land, construction, and completion of residential or commercial property projects in Australia. Unlike our standard commercial property loans, these loans are structured for staged drawdowns, matching the progress of your construction project and usually repaid after the project is completed. Our clients often repay the loan through the sale of the developed property.

Our development finance solutions are tailored to multi-unit residential, commercial, or mixed-use development projects, and differ from commercial construction loans due to the larger amounts involved, as well as more complex eligibility criteria than standard construction loans, which usually apply to single dwellings.

There are many factors involved in obtaining development finance, including the end value of the project, scope of the project, and the developer’s track record.

Commercial development finance typically requires a 35% deposit of the land cost, though this varies based on your experience and the project specifics, while construction costs can be funded up to 100% of the total build cost in some cases. First-time developers generally need higher deposits, while experienced developers with strong track records may access more attractive funding.

For SMSF commercial development projects, the deposit requirements are typically higher at 30-35%. 

Development finance approval typically takes 2-4 weeks from submission of a complete application, though complex projects may require up to 6 weeks. The timeline includes initial assessment (2-3 days), valuation and feasibility review (5-10 days), credit approval (3-7 days), and documentation (3-5 days).

Pre-sales requirements can extend timelines for residential developments. For faster funding needs, consider commercial bridging finance to secure sites while finalising development finance.

While 100% development finance is not common, it is possible in some cases, often where we help a client structure a finance solution that combines multiple funding sources. Options can include using existing property as additional security (cross-collateralisation), mezzanine finance to top up senior debt, joint venture partnerships providing equity, or vendor finance for land purchases.

Most of our developer clients achieve an effective 100% funding of construction costs by using owned land as an equity contribution. For commercial construction projects, some lenders offer up to 90% of total development costs for experienced developers with strong pre-sales.

While pre-commitments strengthen your application and can improve lending terms, they are not a requirement if the end product suits owner-occupiers or investors (offices, warehouses, medical suites). 

For speculative commercial developments, we find that lenders focus on location quality, your development experience, and comparable sales evidence. Mixed-use developments with residential components usually require 60-80% pre-sales. Industrial developments in established precincts often proceed without pre-sales given strong investor demand.

Experienced and first-time property developers are welcome to apply for project finance. This can include builders and investors. Our lenders will assess applications based on eligibility factors such as project feasibility, financial backing, LVR, prior development experience, and the value and location of the proposed development. Our team can organise a quick feasibility assessment, or you can use our development finance calculator.

There are many reasons to work with an experienced Commercial Property Loan Broker instead of going to a lender directly. The top advantages are:

• You get immediate access to 60+ lenders, some of whom are only accessible via an accredited broker vs single bank option
• You can often get access to better rates & terms through our lender relationships 
• Your credit score will not be affected by negotiating with several lenders at the same time
• You can achieve higher approval rates via expert application structuring
• You will save a ton of time as we handle the entire process
• There is no upfront fee, and typically no cost to you as our time is compensated directly by the lender 

The biggest development finance risks are unexpected project cost overruns or delays. Changing market conditions can also be a risk if property values decline or pre-sales are insufficient to meet project costs. This is why most lenders require feasibility studies, staged drawdowns and regular progress inspections.

Financial solutions if costs overruns do occur can include utilising contingency allowances (if not already deployed), additional equity injection from the developers, mezzanine finance for smaller overruns, selling down project portions to fund completion, or restructuring to cheaper finishes where possible.

Getting the right insurance and secondary finance options in place should also be part of your planning process. 

Lenders will evaluate your development project’s feasibility through key metrics including development margin (minimum 20% on costs), debt coverage ratio (1.5x minimum), pre-tax ROI (25% minimum per annum), loan-to-value ratio (LVR) on completion (65-70% maximum), and interest coverage during construction.

They also assess market comparable sales evidence, absorption rates for the area, and your development experience weighting. Location-specific analysis particularly for Sydney, Melbourne, or Brisbane markets factors into their feasibility assessment. We find using professional feasibility software and quantity surveyor reports will strengthen your application.