Most development finance applications don't fail because the project is bad — they fail because the application doesn't speak the lender's language. Since 2023, lenders across Australia have materially tightened their credit criteria: higher presale thresholds, closer scrutiny of sponsor track records, and less tolerance for feasibility modelling that glosses over contingency and holding costs. Understanding what's actually being assessed — before you approach a single lender — is what separates a clean approval from six months of wasted time.
What Lenders Actually Assess
Every lender runs the same set of ratios before they read anything else. Get comfortable with these numbers, because they determine whether your deal is even worth structuring.
Loan-to-GRV
Gross Realisable Value (GRV) is the total end value of the completed project — what the units or lots will sell for at today's market. Lenders will typically lend between 65% and 70% of GRV. Some non-bank lenders will stretch to 72–75% for low-risk residential projects with strong presales, but that's the exception, not the baseline you should model around.
Lend-to-TDC
Total Development Cost (TDC) includes your land acquisition, construction contract, consultants, finance costs, statutory charges, and contingency. Lenders typically cap their exposure at 70–80% of TDC. This is a secondary constraint — if your GRV is healthy but your TDC is bloated, you'll hit the TDC ceiling before GRV becomes binding.
Presale Requirements
This is where lender appetite diverges sharply. Major banks — the Big Four and some regional lenders — typically require presales sufficient to cover 100% of the debt, sometimes more. Non-bank lenders, depending on location and asset class, will often accept presales covering 60–80% of the loan. Private credit funds may lend on a speculative basis entirely, though the pricing reflects that flexibility. For residential apartment projects in the ACT, expect most lenders to sit in the 80–100% debt cover range given current market conditions.
Sponsor Track Record
A first-time developer is not unbankable, but they need to compensate elsewhere — through an experienced project manager or builder, a more conservative feasibility, or a larger equity contribution. Lenders want to see that the people running the project have navigated construction before. A clean CV of completed projects, delivered on time and within budget, is worth more to a credit team than almost anything else.
Getting Your Feasibility Right
The application form is administrative. The feasibility model is the actual application. Lenders — and their QS teams — will pull your numbers apart, and anything that looks optimistic without justification will be discounted or queried until the deal stalls.
GRV assumptions — supported by recent comparable sales, ideally within 2km and within the last six months. Lenders will apply their own OMV which may be lower than your agents' appraisals.
TDC breakdown — line-item construction costs from a quantity surveyor or builder's tender, not a rule-of-thumb per-square-metre estimate. Lenders will appoint their own independent QS, and discrepancies between your model and theirs create problems.
Contingency — typically 5–10% of the hard construction cost, depending on project complexity. Modelling 3% looks like wishful thinking. Modelling 10% demonstrates that you've done this before.
Holding costs — interest during construction, council rates, insurance, and any carrying costs during the presale period. These are frequently underestimated and can materially erode margin.
Profit on cost — most lenders want to see a minimum 20% profit on cost (net profit divided by TDC). Below that, the deal is marginal. Above 25% gives you negotiating room.
At Black Mountain Financial, we run institutional-grade feasibility modelling as part of our advisory process — not to generate a number that works, but to identify where the deal is strong and where it needs work before any lender sees it. That distinction matters.
Choosing the Right Lender for Your Project
There is no universally correct lender for development finance. The right lender is the one whose credit appetite aligns with your project's specific risk profile at that point in time.
Major Banks
Lower pricing — typically BBSY-based margins of 2.5–3.5% — but significantly higher presale requirements, longer credit processes, and less flexibility on structure. They suit larger, lower-risk projects from experienced developers with clean balance sheets. If your project qualifies, a major bank facility is worth the additional effort.
Non-Bank Lenders
The non-bank sector has expanded substantially in Australia over the last five years. These lenders — specialist development finance companies, mortgage funds, and credit funds — will accept lower presale coverage, move faster through credit, and consider projects that banks won't touch. Their pricing reflects the additional flexibility: typically 4–7% margins depending on LVR and project risk.
Private Credit
For speculative projects, land bank loans, or situations requiring a quick settlement, private credit funds offer speed and flexibility that regulated lenders cannot match. All-in costs of 12–18% annualised are not unusual, but for the right situation, getting the deal done matters more than the rate.
We maintain active relationships with over 50 lenders across all three categories. That breadth means we're matching your deal to the lender most likely to approve it, on terms that work.
The Application Process
1. Feasibility and deal structuring — stress-test the model before any lender is approached. What happens to your profit if construction costs run 10% over budget? If GRV softens 5%? If settlement takes six months longer than planned?
2. Site due diligence — confirm planning approvals, zoning, any s.88B restrictions, contamination risk, and title issues. Lenders will uncover these regardless; surfacing them early gives you options.
3. Lender selection and indicative terms — approach two or three lenders appropriate to your deal and request indicative term sheets. This anchors the negotiation and confirms appetite before you invest in formal application costs.
4. Formal application and credit submission — full package: feasibility, planning documentation, development approval, builder's contract or tender, presale contracts, sponsor financials and track record.
5. QS appointment and construction assessment — lenders appoint an independent quantity surveyor to assess the construction cost estimate and drawdown schedule. Align your model with industry benchmarks before this step.
6. Loan documentation and drawdown schedule — once credit approved, legal documentation is prepared and the drawdown schedule agreed. Progress draws are typically tied to QS-certified construction milestones.
Common Reasons Deals Don't Get Approved
Insufficient presales — the deal is presented to a bank-tier lender without the debt coverage to satisfy their credit policy. The solution isn't to argue the merits; it's to find a lender whose policy fits the presale position.
Inflated GRV assumptions — using peak-market comparable sales in a softening market. The lender's valuer will apply a conservative OMV and the loan proceeds shrink accordingly.
Understated TDC — construction cost estimates that don't hold up under QS review, or feasibilities that exclude consultants, finance costs, or marketing. When the true TDC is higher, profit on cost falls below minimum thresholds.
Thin developer equity — trying to fund the deal at maximum LVR without meaningful cash equity contribution. Lenders view high-leverage deals from developers who aren't materially exposed to downside with significant scepticism.
Incomplete documentation — approaching lenders before development approval is in place, before a building contract is executed, or with incomplete presale contracts.
Working With a Specialist Broker
A development finance transaction is not a home loan with extra steps. The variables — lender selection, feasibility positioning, presale structuring, QS alignment, drawdown mechanics — interact in ways that catch developers who approach it without specialist support.
At Black Mountain Financial, based in Canberra and operating across Australia, our role is advisory through the full life of the deal — not just transactional at the term sheet stage. That means we're involved in the feasibility before you've committed to a site, structuring the deal before you've approached a lender, and managing the drawdown process through to practical completion.
George Popadalis leads our commercial finance practice with direct lender relationships across more than 50 institutions — major banks, non-bank credit funds, and private lenders — built over years of placing development transactions across residential, commercial, and mixed-use asset classes.
If you're working through a development project in the ACT, New South Wales, or anywhere in Australia, see how we approach development finance or use our development funding calculator to run your initial numbers.