Property development finance is a short-term commercial loan used to fund the construction of three or more dwellings on a single title, and it’s drawn down in stages as building costs are actually incurred, rather than paid out as one lump sum. Three broad categories of lender write these loans in Australia: banks, non-bank lenders and private lenders, and none of them is automatically the “right” choice. Dark Horse Financial’s panel of 100+ lenders spans all three, which is what makes it possible to compare them properly on a single deal.
Introduction
Picking the right lender for a development project rarely comes down to interest rate alone, however tempting it is to shop on price first. The lender category you approach, whether that’s a bank, a non-bank or a private financier, shapes the loan-to-value ratio (LVR) you’re offered, how quickly the funds move, and just how much documentation you’ll need to pull together before anyone signs off on approval. A developer sitting on a fully presold townhouse project with a string of completed builds behind them is in a fundamentally different position to a first-time developer testing a single site, and lenders price and structure their loans accordingly.
A lot of what’s published on property development finance comes from a single lender describing their own product, which makes it genuinely hard to compare options on a level footing. This article takes the opposite approach: a panel-wide view of what counts as development finance, what lenders actually assess before they’ll approve a loan, how funding gets structured and drawn down through a build, and a head-to-head comparison of banks, non-banks and private lenders.
Key Takeaways
- Property development finance generally kicks in once a project reaches three or more dwellings on a single title — go smaller than that and you're usually looking at standard residential or construction lending instead.
- Banks are the most conservative of the three, and 60–65% of total development cost (TDC) is about as far as they'll typically stretch.
- Non-bank lenders will often go a little further on LVR than a bank would, though exactly how much further comes down to the lender, the project, and what the panel looks like at the time.
- Private lenders offer the widest range of all; for an experienced, well-qualified developer that can mean up to roughly 75% of TDC, though it's assessed case by case rather than handed out as a standard rate.
- Testing all three lender categories on one deal, which is essentially what a specialist broker does, is the most practical way to find out which route actually suits a given project.
What Counts as Property Development Finance in Australia
How much you can borrow for a development depends heavily on which category of lender you’re dealing with, because banks, non-banks and private lenders apply genuinely different LVR settings to the same project. Banks tend to be the most conservative, typically lending up to 60–65% of total development cost (TDC). Non-bank lenders generally sit a step above that, often willing to stretch a little further on LVR than a bank would, though where exactly that lands depends on the lender, the strength of the project and prevailing panel conditions at the time. Private lenders offer the widest range of all: some will fund up to roughly 75% of TDC for experienced, well-qualified developers, though that figure is indicative and assessed strictly on a case-by-case basis rather than offered as standard.
| Lender Type | Typical LVR of TDC | General Approach |
|---|---|---|
| Banks | Around 60–65% | Conservative, priced on strong financials and presales |
| Non-bank lenders | Above bank levels, deal-dependent | More flexible on LVR, presales and documentation |
| Private lenders | Up to roughly 75% for qualified developers | Case-by-case, prioritises security and exit strategy |
It’s worth being clear about what LVR is actually measured against here. Development lenders calculate it against total development cost, meaning land plus construction plus soft costs such as council fees, consultants and contingency, rather than against land value alone. A site that looks attractively cheap on paper won’t necessarily unlock a higher LVR if the build cost pushes the total project cost up. Presale levels, a developer’s track record and the strength of the exit strategy all play into the LVR a lender is ultimately willing to offer, on top of the baseline set by their lender category.
The Core Documents Lenders Need Before They'll Assess Your Application
There’s no single universal document list here, mainly because every lender on Dark Horse Financial’s panel runs its own credit policy, and what one wants isn’t always what another insists on. Even so, a fairly consistent core keeps coming up whenever a development finance application gets assessed — and turning up to that first conversation with most of it already in hand tends to speed things along considerably.
Property Development Finance Document Checklist
- Feasibility study or detailed project costing
- Approved development application (DA) or planning permit
- Fixed-price building contract with a licensed builder
- Presale contracts or a pre-sales schedule, where the lender requires it
- Independent valuation and quantity surveyor (QS) report
- Developer track record, including completed projects
- Personal and/or company financial statements
- A clear, documented exit strategy
Some of these carry more weight than others depending on the lender category. Banks lean heavily on the feasibility study, presales and financials; private lenders often weight the valuation, the QS report, the security position and the exit strategy more heavily than presales; non-bank lenders typically sit somewhere between the two. Either way, walking into a first conversation with most of this checklist already assembled puts a developer in a noticeably stronger position.
Why Your Development Track Record and Background Matter to Lenders
A lender underwriting a development loan is underwriting the person delivering the project just as much as the site itself, which is why a developer’s track record ends up carrying roughly as much weight as the numbers on the feasibility study. Hand two developers an identical feasibility study, send them to the same lender, and they can still walk away with very different terms — simply because one has a longer, cleaner history of finishing projects on time and on budget, and the other doesn’t.
First-time developers typically face more scrutiny than repeat developers, and it’s common to see lower LVRs or higher presale requirements attached as a result, though the exact pattern varies from lender to lender and deal to deal. Lenders look closely at a developer’s history of completed projects, their existing relationships with builders and consultants, and any development-specific credit history, none of which shows up on a standard credit file in the way it would for a personal loan.
None of this rules a first-time developer out. A specialist broker can help pre-package a developer’s track record, project team and supporting documentation in a way that presents the deal in its strongest light, which matters most on a first submission when a lender has nothing else to go on.
How Development Loan Funding Structures and Drawdowns Work
A development lender doesn’t just approve an amount and hand it over; it approves a maximum facility, sized against total development cost (TDC) and, often, the completed project’s gross realisation value (GRV) — with presale coverage sometimes factored in on top. The loan is then paid out in stages as the build actually progresses, not as a single lump sum on settlement.
Most bank facilities also expect the developer’s own equity — land value plus whatever’s already been spent on planning, consultants and approvals — to go in before the bank starts advancing funds, sometimes described as equity being drawn first. Non-bank and private lenders often structure this differently, contributing pro-rata alongside the developer’s equity rather than waiting for it to be fully spent, which is one of the more meaningful structural differences between the two. Once that condition is met, drawdowns follow the build itself, commonly moving through:
- Land or site acquisition
- Base and slab
- Frame
- Lock-up
- Fit-out
- Completion
Before each drawdown, an independent quantity surveyor (QS) certifies the builder’s progress claim — checking the value of work actually completed, variations, remaining contingency and, critically, the cost still needed to finish the job. That last figure drives what’s usually called the cost-to-complete test: after this drawdown, is what’s left in the facility still enough to finish the project?
Interest is typically capitalised into the facility rather than billed to the developer monthly. Interest accrues only on funds actually drawn, but adds to the balance owed rather than requiring a cash payment.
Once construction reaches practical completion, the facility itself needs to be repaid or replaced rather than simply rolling on. For a residential project that typically means settlements on presold or completed dwellings; for a commercial or industrial asset it might mean sale proceeds, or refinancing the development facility into a standard investment loan if the developer intends to hold the completed asset rather than sell it.
Using Second Mortgage and Mezzanine Finance in Property Development
A second mortgage, sometimes called mezzanine finance in a development context, lets a developer borrow against equity in the site behind an existing first mortgage. It’s most commonly used to bridge the gap between what a senior lender will fund and the total cost of the project, rather than as a first port of call.
Because it sits behind the first mortgage in priority, a second mortgage carries more risk for the lender than senior debt does, and pricing reflects that. It’s commonly used to cover the gap between a bank’s senior LVR, typically 60–65% of TDC, and the remaining equity a developer needs to fund the project, which is exactly the sort of shortfall that stalls otherwise viable projects. On Dark Horse Financial’s panel, private lenders are the most common source of second mortgage finance, largely because private lending tends to move faster and assess security and exit strategy more flexibly than a bank or non-bank would on this kind of subordinated position.
Banks vs Non-Bank Lenders vs Private Lenders: A Side-by-Side Comparison
Really, this is the question the whole article has been building towards, and it doesn’t have a neat one-line answer — most of what gets written on bank vs non-bank lender for development finance comes from a lender describing their own product, not comparing it honestly against the alternatives. A panel-wide broker view is different for the simple reason that it isn’t trying to sell one category over another.
Banks come with the lowest cost of capital of the three, but that’s really the trade-off for the strictest documentation and presale requirements and, frankly, the slowest approval timelines — typically lending up to 60–65% of TDC. Step across to a non-bank lender and credit criteria loosen up somewhat, LVR tolerance tends to run a bit higher than a bank’s, and you’re still dealing with a fully regulated lender rather than something looser; La Trobe Financial is a well-known name in this space, mentioned here purely as a factual market reference rather than any comment on its rates or products. Private lenders are where things move fastest, and where developer experience and presale requirements get the most flexible treatment, with LVRs sometimes reaching roughly 75% for a qualified developer — though naturally, that speed and flexibility comes at the highest cost of capital of the three.
| Lender Type | Typical LVR | Approval Speed | Documentation Burden | Best Suited To |
|---|---|---|---|---|
| Banks | ~60–65% of TDC | Slower | Highest | Well-presold, well-documented projects with strong financials |
| Non-Bank Lenders | Above bank levels, deal-dependent | Moderate | Moderate | Developers wanting more flexibility on criteria than banks allow |
| Private Lenders | Up to ~75% of TDC (case-by-case) | Fastest | Lowest | Time-sensitive deals, lower presales, or less conventional projects |
Dark Horse Financial doesn’t represent any single lender in any of these three categories, and this comparison is deliberately not framed as a “best” or “cheapest” ranking, because the right answer genuinely depends on the deal in front of you.
The Benefit of Working with a Specialist Broker with a Large Lender Panel
With a large lender panel behind them, a broker can put one application in front of banks, non-banks and private financiers all at once, instead of a developer working through each category separately and comparing offers manually, weeks apart from each other. That’s most valuable when timing is tight, or when a project simply doesn’t fit neatly into any one lender’s standard credit box.
Dark Horse Financial’s panel spans lenders across all three categories, with approval on some unsecured products available in as little as 24–48 hours (scoped to those specific products, not to development finance as a whole, which naturally takes longer to assess). The business has arranged funding for 1,000+ businesses over more than 10 years, and operates as a Credit Representative (No. 465325) of Buyers Choice Licencing Pty Ltd (Australian Credit Licence No. 509484, Money Quest Group). This article is written by Jeff Suter, Director and Founder of Dark Horse Financial.
For developers wanting to explore funding options more broadly before committing to a specific development finance pathway, Dark Horse Financial’s business loans hub is a practical starting point.
Frequently Asked Questions
Property development finance is a short-term commercial loan for projects involving three or more dwellings on one title, drawn down in stages against certified construction costs rather than paid out as a single lump sum.
Funds are released in staged drawdowns tied to certified build milestones, from acquisition through to completion, with an independent QS typically certifying each stage. Interest is usually charged only on funds actually drawn, not the full facility.
Start by assembling a feasibility study, an approved DA, a fixed-price building contract and any required presales, then approach a bank, a non-bank lender or a private lender directly, or work with a broker who can put the deal in front of all three at once.
Banks generally offer lower-cost capital but apply stricter presale and documentation requirements and move more slowly. Non-bank lenders are typically more flexible on credit criteria and LVR settings, while remaining fully regulated.
Yes, though expect more scrutiny than a repeat developer would face, and likely a lower LVR or a higher presale requirement. A specialist broker can help package a first-time application to present it in its strongest light.
It depends on which lender category you approach. Banks typically fund up to 60–65% of total development cost (TDC), which generally means finding around 35–40% yourself; non-bank lenders usually stretch a little further, narrowing that gap somewhat; and private lenders can fund up to roughly 75% of TDC for an experienced, well-qualified developer, bringing the equity needed down to around 25%. A second mortgage or private lender can also help bridge part of whatever gap remains between your own equity and a senior lender’s LVR.
Conclusion
The right lender for a development project is rarely the first one approached; it’s whichever one’s LVR, approval speed and documentation requirements actually match the deal, which is precisely why comparing across categories matters more than chasing a headline rate. Banks, non-banks and private lenders each solve a different problem, and most projects sit closer to one than the others once the numbers are actually run.
Sources and Methodology
This article draws on Dark Horse Financial’s own lender panel data and lending experience, current as at August 2026, together with general industry information from the following sources:
- Australian Securities and Investments Commission (ASIC) MoneySmart — general guidance on business and commercial lending
- Australian Prudential Regulation Authority (APRA) — authorised deposit-taking institution lending statistics
- Housing Industry Association (HIA) — residential and development construction industry reporting
LVR figures cited for non-bank and private lenders are indicative ranges based on current market conditions and panel experience; they vary by lender, project and individual application, and should be confirmed with a broker before being relied on for a specific deal.
Disclaimer: Loans and other credit products referred to in this article are available to approved applicants only, and standard terms, conditions, fees and lending criteria apply. This article is general information only, does not take into account your individual circumstances, and does not constitute financial, credit or investment advice. Dark Horse Financial is a Credit Representative (No. 465325) of Buyers Choice Licencing Pty Ltd, Australian Credit Licence No. 509484.
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