A project can look profitable on paper and still fail to attract funding. The usual reason is not the postcode or even the borrower’s credit history. It is a feasibility that does not clearly show how the lender gets repaid if costs rise, sales slow or construction takes longer than expected. This developer feasibility funding guide explains what private lenders generally look for when assessing Australian development finance.

For developers, a feasibility is more than a spreadsheet prepared for a planning meeting or equity partner. It is the commercial case for the loan. It needs to show the total cost to complete, the proposed debt structure, the expected end value and enough margin for a lender to take a practical view of risk.

Start with the project, not the loan amount

Many funding enquiries begin with a requested loan figure: “I need $4 million to finish the project.” That is useful, but it is not where the assessment ends. A lender will want to understand the project phase, the security available and the capital required to reach the next value event.

That event may be settlement of completed townhouses, registration of a subdivision, practical completion of a small industrial estate or the sale of retained stock. The funding structure should be built around that point, rather than simply stretching the loan term as far as possible.

For a site acquisition, the key questions are whether planning approval is in place, what due diligence remains and how the borrower will fund the next stage. For a construction completion facility, the focus shifts to the verified cost to complete, builder position, outstanding variations and projected completion date. An incomplete project can still be financeable, but uncertainty needs to be identified and priced honestly.

Build a feasibility lenders can test

A credible development feasibility should separate the project into clear cost and revenue lines. Lenders do not expect every number to be perfect, particularly early in a transaction. They do expect the assumptions to be supported and the contingencies to be sensible.

Development costs need to be complete

The obvious items include land purchase, stamp duty, construction, professional fees, authority contributions and marketing. The costs often missed or understated are holding costs, lender interest, establishment fees, quantity surveyor costs, legal fees, sales commissions, GST timing and contingency.

Interest is particularly important. If the facility is capitalised or drawn progressively, the interest expense may increase as construction advances. A feasibility based on a flat interest estimate can overstate profit materially. Private lenders will commonly test whether the project can service or capitalise interest through to its anticipated exit.

Construction costs should reflect current quotes where available. If figures are based on an older estimate, include a clear allowance for escalation and variations. On a partially completed build, a lender may require an independent quantity surveyor report to confirm work completed, remaining costs and whether the proposed facility is sufficient to finish the project.

Revenue must reflect the likely exit

Gross realisation value, or GRV, should be based on supportable comparable evidence rather than the strongest sale achieved in the area. Residential projects may rely on sales appraisals, signed contracts and current market evidence. Commercial, industrial or specialised assets may require a valuation that considers rent, leases, incentives and capitalisation rates.

Pre-sales can strengthen an application, but they are not the only route to funding. Some private lenders will consider projects without pre-sales where the location, developer experience, loan-to-value ratio and exit strategy are strong. The trade-off is that pricing, leverage and conditions may be tighter.

Retained stock needs its own treatment. If you plan to keep units as investments, do not count them as immediate sale proceeds unless there is a clear refinance plan. Show expected rent, likely valuation, proposed long-term debt and the timing required to move from development finance into a term facility.

The key funding measures in a developer feasibility funding guide

Private development lenders use different credit policies, so there is no universal approval threshold. However, most will focus on loan-to-cost, loan-to-value and the developer’s equity contribution.

Loan-to-cost, or LTC, compares the total debt against total project costs. Loan-to-value, or LVR, compares the loan against current or completed property value. A facility may look conservative on one measure but aggressive on the other, especially where a site has been purchased well below its current value or where a project depends heavily on forecast uplift.

A lender will also consider the debt stack. Senior debt sits first in priority over the security. Mezzanine finance sits behind senior debt and is generally more expensive because it takes additional risk. Equity sits behind both. Mezzanine funding can be useful where a project has a genuine equity shortfall, but it should not be used to hide a feasibility with insufficient margin.

The margin on cost matters because it is the project’s buffer. A healthy projected margin does not guarantee approval, yet a thin margin gives little room for delays, cost overruns or softer sales. A lender may run downside scenarios using lower end values, higher build costs or longer holding periods. Your own feasibility should do the same before it is submitted.

Match the facility to the actual funding gap

The right loan structure depends on the point of pressure in the project. A short-term caveat loan may help secure a site, pay a deposit or meet a time-critical settlement while longer-term finance is arranged. It is fast and flexible, but it is generally not the right solution for a multi-year construction programme.

A first mortgage development facility may be suitable for land acquisition, construction or completion, with funds released in stages against progress. Drawdowns may be tied to quantity surveyor certificates, invoices or agreed construction milestones. This protects both the lender and the developer from the facility being exhausted too early.

A second mortgage can release equity from property that already has a senior lender in place. It can assist with a deposit, authority payment, head works or working capital, provided there is sufficient equity and the repayment path is clear. Consent from the first mortgagee may be required depending on the circumstances.

Bridging finance may suit a completed asset or a project approaching completion where the exit is sale, refinance or settlement of contracted stock. Asset finance can preserve property equity by funding eligible plant, equipment, vehicles or construction-related assets separately. The principle is simple: do not use expensive property-backed debt for an asset that can be financed more efficiently elsewhere.

Present the borrower story as well as the numbers

Development funding is not assessed in a vacuum. Lenders will consider the borrower entity, director experience, past projects, credit profile and available security. A company or trust structure is common, but personal guarantees are often requested, particularly for smaller or higher-risk facilities.

Previous credit issues do not automatically rule out private funding. What matters is whether they are explained, resolved where possible and outweighed by the security and exit. The same applies to tax arrears, an ATO payment plan, residual stock or a delayed build. Trying to leave these out creates problems once due diligence starts.

A strong submission usually includes the purchase contract or title details, planning documents, development approval, construction contract or cost plan, feasibility, valuation or sales evidence, details of existing debt and a clear exit strategy. If FIRB approval is relevant, its status and timing should be disclosed early. Delays around approvals can affect settlement deadlines and lender appetite.

Test the downside before the lender does

Before seeking terms, run at least three scenarios: the base case, a cost-overrun case and a slower-exit case. Consider what happens if construction costs increase by 5 to 10 per cent, settlements are delayed by six months, or the end value is lower than forecast.

If the project only works in the best-case scenario, more equity, a lower acquisition price or a revised staging plan may be needed. That is not a failure. It is a chance to address the capital gap before debt is committed and works are underway.

Private funding can provide a practical path where a bank is delayed by pre-sale requirements, policy constraints or a non-standard borrower profile. However, speed should not replace discipline. Compare the total cost of the facility, including interest, line fees, legal costs, valuation costs and any exit fee, against the value of securing the project or completing it on time.

For developers with a viable project but a complex funding requirement, No Doc Loans can assess the security, feasibility and exit strategy, then seek suitable options from its private lender panel. The most useful first step is to bring forward the real figures, including the pressures in the deal. A clear feasibility and an honest downside case give lenders something they can back – and give you a better basis for moving the project forward.