How to Get Property Development Finance in Australia When a Bank Says No
A bank decline does not automatically mean a property development cannot be funded.
Australian developers, builders and property investors may consider private property development finance where a project is time-sensitive, does not fit mainstream bank policy, has limited pre-sales, requires a short-term funding solution or needs capital to complete a defined stage of the development.
Private development finance is not automatic approval. Lenders assess the project, security property, development costs, available equity, loan-to-value ratio, borrower experience and exit strategy carefully.
At Assurity Capital, private first mortgage and second mortgage loans are available for genuine business, investment and development purposes only. Finance is subject to assessment, suitable security, eligibility, lender criteria, fees, approval and a realistic exit strategy.
What is property development finance?
Property development finance is funding used to acquire, develop, construct, complete, refinance or sell property projects.
It may be used for:
Development-site acquisitions.
Land subdivisions.
Duplex and dual-occupancy projects.
Townhouse developments.
Apartment developments.
Commercial property developments.
Industrial developments.
Mixed-use projects.
Construction completion.
Residual stock finance.
Refinancing an existing development facility.
Short-term bridging finance before long-term development funding is available.
Development finance is usually structured around the project’s costs, security, timeline, expected value and exit strategy.
Why would a bank decline property development finance?
Banks may decline or delay a development-finance application for many reasons, including:
Insufficient pre-sales.
Limited developer experience.
Incomplete development approvals.
Construction costs that have increased.
A project that does not meet the bank’s preferred location, size or asset class.
Inadequate serviceability under the bank’s policy.
Insufficient borrower equity.
A short settlement deadline.
A complex company, trust or ownership structure.
Delays in construction, planning or sales.
An expiring existing loan that needs urgent refinancing.
A bank decline should be understood before a borrower seeks alternative finance. The cause of the decline helps determine whether a private first mortgage, second mortgage, bridging facility, construction-completion loan or another structure may be appropriate.
Can a private lender fund a property development?
Potentially, yes.
Private lending may be considered for eligible property-development scenarios where there is suitable real estate security, a clearly defined funding purpose and a credible exit strategy.
Private development finance can be particularly relevant where:
A development site must settle quickly.
Construction is underway but additional capital is required.
A bank refinance is progressing but needs more time.
A project has completed but residual stock remains unsold.
The borrower needs to refinance an existing private loan.
The development has strong property security but does not yet meet mainstream lender criteria.
The developer needs bridging finance while awaiting a sale, refinance or capital event.
The lender will consider the project on its current facts. It will not rely only on the original development feasibility or expected profit.
What do private lenders assess for development finance?
A private lender will typically assess the strength of the property security and the project’s ability to reach a realistic exit.
Key considerations include:
Security property
The lender needs to understand the property type, title, location, zoning, ownership structure and marketability.
Security may include a development site, existing residential property, commercial property, industrial property, completed units or other acceptable real estate.
Loan-to-value ratio
LVR compares the total debt secured against the property with the lender’s accepted value.
For development finance, the lender may assess current “as is” value, land value, completed value, gross realisation value or another accepted measure depending on the stage and structure of the project.
The assessment is based on lender criteria and supporting evidence. A developer should not assume a lender will lend against projected future value without reviewing the project in detail.
Development costs and remaining works
The lender may review the cost to complete the project, construction progress, builder arrangements, contingencies and whether the required funding is sufficient to achieve completion.
A funding gap can be more difficult to solve if the remaining construction cost is uncertain.
Experience and project management
A lender may consider the developer’s prior experience, builder capability, consultant team, approvals and the practical plan for delivering the project.
Existing debt
The lender needs accurate payout figures for existing mortgages, construction facilities, caveats, creditor claims or other security interests.
Exit strategy
A development loan needs a clear path to repayment. This may include sale of completed stock, sale of the development site, refinance into a long-term facility, or another documented capital event.
What types of private development finance are available?
The right structure depends on the stage of the project and the purpose of funds.
Development-site acquisition finance
This may assist a developer or investor to purchase a site before longer-term construction finance is finalised.
It is often short-term and may require a clear plan to obtain approvals, complete due diligence or move into the next funding stage.
Bridging finance for property development
Bridging finance can cover a short gap between an immediate project need and a future event, such as a site sale, development-finance settlement or bank refinance.
Construction-completion finance
Construction-completion funding may be considered where a project is underway and capital is needed to finish the works, subject to suitable security, cost-to-complete assessment and a realistic exit.
Private first mortgage
A first mortgage gives the private lender first-ranking registered security over the property. It may be used for development acquisition, refinance, construction-related costs or a defined project stage.
Private second mortgage
A second mortgage may provide additional capital where an existing first mortgage remains in place and there is sufficient equity available.
It can be used for eligible development, business or investment purposes, but the lender assesses the combined LVR and the second-ranking security position carefully.
Residual stock finance
Residual stock finance is short-term property-backed funding secured against completed but unsold residential or commercial units.
It may help a developer repay a construction facility, avoid a rushed sale or release capital while remaining stock is sold.
How much equity do I need for development finance?
There is no single equity requirement for every property-development loan.
The amount of equity required depends on:
The project type and location.
Land value and current property value.
Existing debt.
Construction stage and cost to complete.
Development approvals.
Pre-sales or evidence of buyer demand, where relevant.
The lender’s accepted LVR.
The proposed loan term.
The exit strategy.
A lender will generally want to see that the borrower has a meaningful financial interest in the project and that the total debt remains appropriate for the security and expected outcome.
How can I prepare a stronger development-finance application?
A clear, complete proposal helps a lender understand the project and assess it more efficiently.
Prepare:
Property address and ownership details.
Contract of sale or current title information.
Development approval, where relevant.
Plans, specifications and consultant reports.
Detailed development feasibility.
Construction budget and cost-to-complete schedule.
Builder contract and builder details.
Current debt statements and payout figures.
Recent valuation or comparable sales evidence.
Proposed loan amount and required settlement date.
Explanation of how the funds will be used.
Clear exit strategy and supporting evidence.
If the project has changed from its original plan, explain why. For example, if construction has been delayed or costs have increased, provide updated information rather than relying on outdated forecasts.
Can I get development finance without pre-sales?
Potentially, depending on the project, security, developer experience, LVR and exit strategy.
Pre-sales can be important to some lenders because they provide evidence of demand and may support the exit. However, not every private development facility is assessed in the same way as a traditional bank construction loan.
A private lender may consider a project with limited pre-sales where there is strong security, conservative leverage, sufficient remaining capital and a credible alternative exit strategy.
No-pre-sale development funding usually involves closer assessment of the property, sales evidence, feasibility, borrower equity and contingency planning.
How quickly can private development finance settle?
Timing depends on the complexity of the project.
For a straightforward property-backed private loan, indicative terms may be available within 24 to 48 hours. Settlement may be possible within days where the security, valuation, legal documents, existing debt and lender conditions are complete.
Development finance can take longer because the lender may need to assess plans, approvals, construction costs, feasibility, builder arrangements and the exit strategy.
A borrower with an urgent settlement should disclose the deadline at the beginning and provide complete information as early as possible.
What are the risks of private development finance?
Private development finance can provide flexibility and speed, but it is a serious property-backed financial commitment.
Key risks include:
Construction delays or cost overruns.
Changes to property values or buyer demand.
Delays to approvals or sales.
Insufficient funds to complete the project.
A bank refinance not being available when expected.
Interest, fees and legal costs increasing total debt.
Capitalised interest increasing the payout figure.
An unsuccessful project exit.
Enforcement risk if the loan cannot be repaid.
Before proceeding, developers should understand the total cost, loan term, security position, cost-to-complete requirements and exit strategy. Independent legal, financial, construction and tax advice should be obtained where appropriate.
Property development finance with Assurity Capital
Assurity Capital assists developers, builders, investors and business owners across Sydney, NSW and Australia with property-backed private lending.
We consider private first mortgages, second mortgages, bridging finance, construction-completion funding, residual stock finance and short-term development funding for eligible business and investment purposes.
Whether the requirement is for a site acquisition, development refinance, construction completion, residual stock or short-term project funding, every scenario is assessed individually against the property security, purpose of funds and exit strategy.
Finance is subject to assessment, security, eligibility, lender criteria, fees and approval.
Frequently Asked Questions
Can I get property development finance if a bank says no?
Potentially. A bank decline does not automatically rule out private development finance. A private lender may assess the property security, available equity, development stage, loan purpose and exit strategy differently.
Can I get development finance without pre-sales?
Potentially. Some private lenders may consider projects with limited pre-sales where the security, LVR, remaining costs and exit strategy are strong enough. Every project is assessed individually.
What is the best exit strategy for development finance?
The best exit depends on the project. Common exits include sale of completed stock, sale of the site, refinance into a bank or non-bank facility, or another documented capital event.
Can I use a second mortgage for a development project?
Potentially. A second mortgage may be considered where a borrower has sufficient equity after an existing first mortgage and the funding has an eligible development, business or investment purpose.
What documents do I need for property development finance?
Common documents include property details, development approval, plans, feasibility, construction budget, existing loan statements, valuation evidence, required funding amount and a clear exit strategy.
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