Development finance is a type of lending designed to fund the construction or redevelopment of property. Unlike standard loans, the lender is not funding a completed asset, they are funding a project that will be delivered over time.
The loan is typically structured with staged drawdowns. Funds are released progressively as construction milestones are met, rather than as a lump sum. This requires careful planning to ensure the project remains funded from start to finish.
For larger developments, particularly those above $10 million, the structure becomes more detailed. Lenders will assess not only the borrower, but the entire project and how it will perform from start to completion.
Development lenders focus heavily on feasibility and risk.
They will review:
For some projects, presales may be required to demonstrate demand. For others, particularly commercial developments, the focus may be on leasing strategy and projected income.
Each lender has a different appetite. Some are comfortable with smaller projects, while others focus on larger scale developments or specific asset classes.
The structure of a development loan plays a critical role in how the project runs.
Key considerations include:
Getting this right ensures the project remains financially stable throughout construction. Poor structuring can lead to funding gaps or delays, which can impact the entire project.
Development finance is highly specialised and not suited to a one lender approach.
We assess the project in detail, identify lenders that are aligned with the scale and type of development, and position the deal so the feasibility is clearly understood. This includes working through the numbers, presenting the strengths of the project, and managing lender expectations from the outset.
This approach reduces delays and gives you a more direct path to securing funding.
If you’re planning a development and need funding structured properly from the outset, speak with Peter Marcs Finance and discuss your project.
