Commercial finance
Development finance eligibility: who may qualify in Australia
Development finance eligibility in Australia: who may qualify, the development loan requirements lenders weigh, and how presales and equity affect a project.
Development finance eligibility comes down to the project, the people behind it, and the numbers stacking up for a lender. In short, a lender looks at the experience of the developer, the feasibility of the project, the level of presales or precommitment, and how much you are borrowing against the cost and the end value. Whether you qualify, and on what terms, depends on your circumstances and lender criteria. There is no single national rulebook, so two lenders can reach different views on the same project.
This guide explains what development finance is, who may qualify for development finance, and the development loan requirements a lender typically weighs up. It is written for property developers and small builders weighing a project in Australia. Figures on deposits, loan-to-value ratios, interest rates, and credit history here come from the Australian Securities and Investments Commission (ASIC) Moneysmart, which sets out general lending principles. Development-specific settings sit with each lender and change with the market, so treat the criteria below as a guide, not a promise.
What development finance is
Development finance is short-term funding used to build or substantially improve property, usually drawn down in stages as construction progresses. It differs from a standard home loan, which funds a finished property and is repaid over a long term. A development facility is repaid when the project is sold or refinanced onto a longer-term loan, often within twelve to twenty-four months.
Because the lender is funding something that does not yet exist, the assessment is built around risk: the risk that the project runs over budget, takes longer than planned, or sells for less than forecast. Understanding how lenders view that risk is the first step in working out your development finance eligibility.
Who may qualify for development finance
A lender assesses both the borrower and the project. No single test decides the outcome; the factors below are weighed together, and a strength in one area can offset a gap in another.
The borrower side usually covers:
- Development experience, including projects you have completed and your track record delivering on time and on budget.
- Financial capacity, including your assets, your contribution to the project, and your ability to service interest during construction.
- Credit history. A credit score is a numerical rating that lenders use to decide whether to lend you money, and a higher score means the lender will consider you less risky. Lenders examine your repayment history, the credit products you hold, defaults, and past credit applications.
- The structure you are borrowing through, whether a company, a trust, or as an individual, and the security available.
The project side usually covers:
- A feasibility study that shows the project costs, the forecast end value, and a clear margin between the two.
- Council approval or a credible path to it, and a realistic construction program.
- A builder and a fixed-price building contract, supported by a quantity surveyor report in many cases.
- The level of presales or precommitment, which is the proportion of the finished product already sold or leased before construction starts.
Meeting these criteria does not guarantee approval. A lender will still form its own view on the project and your capacity, and it may approve, decline, or approve on conditions depending on your circumstances and lender criteria.
Development loan requirements: the numbers a lender weighs
Lenders frame development finance around two ratios and your contribution. The first is the loan-to-cost ratio, which measures the loan against the total cost to deliver the project. The second is the loan-to-value ratio, which measures the loan against the value of the finished project. A loan-to-value ratio, or LVR, describes how much you borrow against a property’s value: as a simple example, a borrower with a 20 percent deposit on a $650,000 property borrows $520,000, an LVR of 80 percent. Development lending uses the same idea, but against the project’s end value rather than a finished home.
The gap between the loan and the total cost is your equity contribution, the cash or land value you put in. The larger your contribution, the lower the lender’s risk, which can affect whether you qualify and the rate you are offered. You can sketch how a loan amount, interest rate, and term affect repayments with the MoneySmart mortgage calculator, keeping in mind that a development facility charges interest only during construction.
Try the borrowing power calculator
Use it to get a rough starting figure for your contribution and serviceability. A calculator gives you a starting point, not an approval.
Presales matter because they reduce the risk that the finished product sits unsold. Many lenders want a level of presale or precommitment that covers a meaningful share of the debt before they fund construction. The required level depends on the lender, the location, and the type of project.
How interest and costs work on a development facility
Development finance is priced for risk and held for a short time, so the cost structure differs from a home loan. A lender may charge an establishment fee, a line fee on the facility, and interest that is often capitalised, meaning it is added to the loan during construction rather than paid monthly. The interest rate may be fixed for the term or variable. A fixed interest rate stays the same for a set period, for example five years, while a variable interest rate can go up or down as the lending market changes, for example when official cash rates change.
When you compare facilities, look past the headline rate. A comparison rate is a single figure showing the cost of a loan that includes the interest rate and most fees, and lenders also charge application or setup fees and ongoing fees for administration. The right structure depends on your circumstances and lender criteria, and the cheapest headline rate is not always the lowest total cost. To compare the principles, see how to choose and compare a loan.
Steps to test your eligibility
Working through these steps in order gives a lender, or the team at Finance Lab, what they need to form a view.
Where development finance sits among your options
Development finance is one tool among several. A smaller project, such as a single dwelling or a duplex, may suit a construction loan rather than a full development facility. Larger residential or commercial projects, and projects with multiple dwellings, are where dedicated development finance usually applies. If you are early in your property journey and weighing your first build, our first home buyer content on construction loans, borrowing power, and the comparison rate covers the groundwork that still applies at a larger scale.
Construction loan first home buyer Borrowing power first home buyer Comparison rate explainedFor a full picture of how a project would be funded, our commercial lending team can map your feasibility against current lender appetite.
CommercialTalk to the team at Finance Lab
Development finance eligibility is rarely a yes or no answer; it is a question of structuring a project so a lender can say yes. If you are weighing a project and want to know how it would be funded, the team at Finance Lab can review your feasibility, your contribution, and your presales position, then match you to lenders whose criteria fit. Finance Lab holds Australian Credit Licence 389328.
Talk it through with the team at Finance Lab
A Finance Lab broker can review your feasibility, your equity contribution and your presales position, then explain how lenders may view your project. No cost to chat, no obligation to proceed.