Who this covers: developers with projects from six dwellings to larger apartment, land estate and commercial builds, and builder-developers.
What lenders do differently
The ratios
Senior development debt is sized against the lower of about 65 to 70 per cent of gross realisation value (excluding GST) and 75 to 85 per cent of total development cost, with the developer's equity in first. Mezzanine or preferred equity can take total debt higher at a higher cost; private lenders go further again on fewer presales.
Presales and the lender
Banks usually want presales covering 100 per cent of the debt, with deposits held and qualifying purchasers; non-bank lenders accept fewer or none for a higher rate and fee. The choice of lender is mostly a presales and timing decision.
What the lender reads first
The feasibility, the development approval, the builder's fixed-price contract and track record, the quantity surveyor's cost report, the valuation on an as-is and on-completion basis, and the developer's experience and equity. A project with those in order is financed in weeks; without them, not at all.
Drawdowns and the exit
Funds are drawn against QS-certified progress claims; interest is capitalised. The exit is settlement of the presales, a residual stock loan on unsold stock, or refinance to investment debt where the developer holds. The exit is assessed at the start.
Worth knowing before applying
A development with the land already held unencumbered reads very differently from one with land debt; GST, the margin scheme and the structure (company, trust, unit trust) are the accountant's and lawyer's work before the lender's; and commercial development is assessed on leasing rather than presales.
The tools that fit
Policies on all of the above differ lender to lender and change without notice; the value of the conversation is knowing which lender's policy reads your payslip best on the day. Understanding how your income is read before you apply is what makes the application calm.