Client Snapshot
Key Takeaways
- A residential builder's major bank indicated it would fund their development, then withdrew after the client had already gone unconditional on the site.
- We secured an indicative offer, subject to valuation and quantity surveyor (QS) report, within one week.
- Formal approval and settlement were both completed in under 21 days, allowing the client to settle on time.
- The $3,515,000 facility, on a 15-month term, funded a three-unit development that the client completed and sold in full.
- Having a broker who understands development lending policy can protect a project when a bank changes its position late in the process.
When a lender withdraws after a developer has already committed to a site, the problem is no longer about finding the cheapest funding. It is about finding a lender that will assess the project properly and move quickly enough to meet a settlement date that will not wait. This case study explains how we arranged $3,515,000 in property development finance for an experienced residential builder whose bank pulled out late, and how formal approval and settlement were completed in under 21 days.
The Business and the Challenge
Our client is a residential builder that builds only its own projects. Rather than taking on construction work for third parties, the business focuses on its own property developments, which gives it full control over site selection, design and build quality.
Their model is consistent and well proven. They buy a rundown property in a good area, then develop it into either a two-on-one or a three-on-one development, built to a very high standard. Traditionally, the business has retained one of the completed units as a long-term investment and sold the others.
For this project, the client approached their major bank for development finance. The bank already held security over a significant number of the client’s investment properties, so it was a natural first choice, and the bank indicated it would fund the project.
On that basis, the client went unconditional on the purchase of the target block. The bank then pulled out of the development finance. With the client contractually committed and settlement fast approaching, they needed a replacement lender and a fast, reliable outcome. That is when they came to us.
Why a Specialist Development Lender Instead of Waiting on the Bank
When a bank withdraws late in the process, the instinct can be to push back, re-submit, or approach another major bank. With a fixed settlement date, we took a different approach.
Time was the critical constraint
Once a buyer is unconditional, the settlement date is fixed by contract. A drawn-out reassessment with the existing bank, or a new application with another major bank, risked running past that date. The priority was a lender whose process could produce a clear indicative position quickly and move to formal approval without unnecessary delay.
Development lending is a specialist area
Property development finance is assessed differently from standard residential or investment lending. Specialist development lenders focus on the project itself, including the site, the build cost, the end values and the developer’s track record. A builder with a consistent history of completing high-quality projects in good locations is the kind of borrower these lenders understand.
Matching the deal to the right lender
Rather than sending the application to multiple lenders and risking unnecessary credit enquiries, we matched the client’s circumstances to the lender with the right policy fit from our large panel of banks, non-banks and private financiers. This meant the application went to a lender whose appetite already suited the deal: a non-bank lender with a private funding arm dedicated to property development, with pricing that remained competitive and sat just outside bank pricing.
Certainty of outcome
An indicative offer is only valuable if it holds up through valuation and the QS process. Choosing a lender with a clear development policy gave the client confidence that the indicative terms reflected a realistic path to formal approval, not just an early expression of interest.
How the Application Worked
The process moved in two clear stages.
In the first stage, we presented the project and the client’s development experience to the lender. Within one week, the lender issued an indicative offer, subject to a satisfactory valuation and QS report. This gave the client an early, documented position while there was still time to act on it.
In the second stage, the lender’s valuation and QS were completed and the application moved to formal approval. Formal approval and settlement were both completed in under 21 days, meeting the client’s settlement timeline.
Throughout the process, our role was to keep each step moving, coordinate with the lender, and make sure valuation and QS requirements were addressed promptly so that no single step became a bottleneck.
The Outcome
The client settled on the target block on time with a $3,515,000 property development finance facility on a 15-month term. The bank’s late withdrawal did not cost them the site or the project.
The development went ahead as planned. Unlike their usual approach of retaining one unit, on this occasion the client sold all three completed dwellings, recognising a significant profit on the project.
For a builder whose business depends on securing good sites when they become available, the outcome went beyond a single deal. It showed that a late change in a bank’s position does not have to derail a well-planned development, provided the right lender is engaged quickly.
Is Property Development Finance Right for Your Business?
Property development finance may suit you if you are a builder or developer planning a residential development of three or more units on title, such as a three-on-one development, townhouses or a small unit project, and you need funding for land and construction costs.
It may be particularly relevant if:
- Your bank has declined or withdrawn from funding your project.
- You have a fixed settlement date and need a lender that can move quickly.
- You have a track record of completing quality projects and want a lender that will assess the project on its merits.
- You want to understand your options before committing to a site.
Dark Horse Financial arranges property development finance from $300,000 to $50 million. If you are planning a development, or your current funding has fallen through, you can learn more about our property development finance options or speak with our team.
Frequently Asked Questions
Property development finance is a loan used to fund the purchase of a development site and the construction of a residential development with three or more units on title, such as townhouses or small unit projects. Funds are usually released in stages as construction progresses, and lenders assess the project’s costs, end values and the developer’s experience rather than relying only on personal income.
Timeframes vary by lender and project. Many development lenders can issue an indicative offer quickly once they have the key project details, but formal approval generally depends on a valuation and a quantity surveyor’s report. A complete application and a lender whose policy suits the project can help reduce delays.
If a bank withdraws from funding a development, an alternative lender may still be able to assess the project, including non-bank and private lenders that specialise in development finance. Acting quickly matters, particularly if you have a settlement date. A finance broker can help identify a lender whose policy matches your project and circumstances.
Development lenders typically review the site, development approval and plans, the building contract or cost estimate, a feasibility study, a valuation and a quantity surveyor’s report. They also consider the developer’s experience, the project’s end values and, in some cases, presales. Requirements vary between lenders and depend on the project’s size and complexity.
Dark Horse Financial Pty Ltd is a Credit Representative No. 465 325 of Buyers Choice Licencing Pty Ltd.
