Property Development Finance and Bridging for Australian Developers
Development runs on timing. A site comes up with a 30 day settlement, an approval lands three months late, a construction facility expires with four apartments still unsold. None of those are problems with the project. They are problems with the funding calendar, and they are what short-term development finance exists to solve.
We arrange property development finance and bridging loans for property development across Australia, through a panel of private, non-bank and specialist lenders who assess the site, the feasibility and the exit rather than a serviceability calculation.
In short: development bridging facilities typically run 6 to 18 months. Site lending commonly reaches 65% of value, occasionally 70% where an approval is in place. Loan to cost usually sits at 75% to 80%, and loan to gross realisation at around 65%. I
nterest is normally capitalised, so nothing is payable while the project runs. Development pricing starts from around 9% p.a. depending on the stage, the security and the strength of the exit.
Where each facility fits across a project
Most developers do not need one loan, they need three or four in sequence. Knowing which is which saves you approaching the wrong lender at the wrong stage.
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Site acquisition. Buying the land, usually before a construction facility exists. Short-term, secured on the site and sometimes on other assets you hold. This is the classic development bridge.
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Pre-development. Funding planning, design, approvals and consultants while the site is held. Often an extension of the acquisition facility rather than a separate one.
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Construction or senior debt. The main facility, drawn progressively against certified builder claims. This is not a bridging loan and does not behave like one. See bridging loan versus construction loan.
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Mezzanine. Funding that sits behind the senior facility to reduce the equity required. Priced well above senior debt for exactly that reason.
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Completion and stage gap bridging. Covering a cost overrun, a stalled stage, or a senior facility that expires before practical completion.
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Residual stock. Holding completed, unsold stock after the construction facility has to be repaid, so the sell-down happens at your pace rather than the lender's.
Bridging appears at four of those six points. The two it does not cover are the senior construction facility itself, and long-term investment debt once a project is held rather than sold.
The three ratios development lenders use
Residential lending has one ratio. Development has three, and a lender will test all of them. A deal that passes one and fails another does not get funded.
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LVR, loan to value = loan divided by the current site or asset value
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LTC, loan to cost = loan divided by total development cost, including land, construction, consultants, holding costs and contingency
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LTGRV, loan to gross realisation = loan divided by the gross sales value of the completed project
Working ranges in the Australian market:
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LVR on a site: up to 65%, occasionally 70% where a development approval is in place. Land without approval sits lower, sometimes materially.
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LTC: commonly 75% to 80%. This is what determines how much equity you actually need to put in.
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LTGRV: around 65%, and this is the one that most often caps the facility. A lender will fund whichever of the three produces the smallest number.
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Residual stock: 60% to 70% of the as-is value of the unsold stock.
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Profit on cost: not a lending ratio, but lenders generally want to see a feasibility showing 15% to 20% or better. A thin margin means the lender carries the downside if anything moves.
If the underlying mechanics of a short-term facility are new to you, start with how bridging loans work and bridging loans explained.
Two valuation figures also matter and are frequently confused. As-is value is what the site or asset is worth today. On-completion value is what it will be worth finished. Site lending and residual stock lending are assessed on as-is. Only the construction facility works off on-completion, and even then it is discounted.
Site acquisition finance
The most common development bridge. You have found a site, the settlement period is short, and arranging a construction facility takes longer than the vendor will wait.
A developer secures a site with a development approval already granted. Settlement is 60 days and the senior facility will take four months to put in place.
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Site purchase price: $2,400,000
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Bridging facility at 65% LVR: $1,560,000
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Developer equity plus acquisition costs: $840,000 plus duty and legals
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Term: 9 months, interest capitalised, nothing payable while the senior facility is arranged.
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Interest at 9.5% p.a. on $1,560,000 for 9 months: $111,150.
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Establishment fee at 1.5%: $23,400. Valuation, legal and quantity surveyor costs are additional.
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Total cost of funds: $134,550. Balance at exit: $1,671,150, taking the site LVR to 69.6%.
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Exit: the construction facility settles and refinances the bridge as part of the first drawdown.
Pricing and LVR depend on the site, whether an approval is in place, the feasibility and the credibility of the senior debt exit.
The point most developers miss: the bridge has to be sized so that the incoming senior lender can actually refinance it. If the bridge plus capitalised interest lands above what the senior facility will advance against the land, you have created a shortfall you must fund from equity at exactly the moment your equity is committed elsewhere. Size the bridge against the senior lender's land advance, not against the maximum you can borrow today.
Site under contract? Send us the address, the purchase price, the approval status, your feasibility and who you expect to provide the senior debt. We will tell you what is achievable inside your settlement period, and whether the bridge can be refinanced cleanly. Request an assessment.
Residual stock finance
A residual stock loan funds completed, titled, unsold stock at the end of a project. It is one of the most useful facilities available to a developer and one of the least understood.
The situation it solves. Practical completion is reached, titles have issued, and the construction facility falls due. Some stock has settled, some has not. The senior lender wants repaying now, and selling the remaining stock quickly means discounting it. A residual stock facility repays the construction debt and gives you 12 to 24 months to sell properly.
A completed apartment project with four unsold units.
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Combined as-is value of the unsold stock: $3,200,000
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Residual stock facility at 65%: $2,080,000
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Construction facility to be repaid: $1,900,000
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Surplus released to the developer: $180,000
Interest at 9% p.a. on the full facility for 12 months would be $187,200. In practice it is less, because each unit that settles pays down the balance. If half the stock sells at the six month mark, interest over the year is closer to $140,400.
Partial discharges are the mechanism that makes this work. Each unit is released on settlement at an agreed discharge amount, so the facility reduces as you sell rather than sitting at full balance until the end.
Rate and LVR depend on the stock type, the location, how it is selling and the discharge terms agreed.
Negotiate the discharge terms upfront. The discharge amount per unit is the number that decides whether you see any cash from early settlements or whether every dollar goes to the lender until the facility is repaid. It is far easier to agree at term sheet stage than to renegotiate once units are exchanging.
Bridging around a construction facility
A bridging loan is not a construction facility. It does not fund progressive drawdowns against certified claims. What it does is cover the periods on either side of one, and the gaps in the middle.
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Cost overrun. The senior facility is exhausted and the project is close to finished. A short facility completes the works so practical completion can be reached.
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Stage gaps. Timing between stages has slipped and holding costs are running with no drawdown available. See covering settlement timing gaps.
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Expiring senior debt. The construction facility reaches its expiry before completion, and the lender will not extend on acceptable terms.
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Take-out bridging. Practical completion is reached but titles have not issued, so a residual stock facility is not yet available.
For construction bridging on a single build rather than a development programme, see commercial bridging loans, which covers the construction cluster in more detail.
Mezzanine and second mortgage funding
Mezzanine funding sits behind the senior facility and reduces the equity you have to contribute. It is usually documented as a second mortgage, so it requires the senior lender's consent and a deed of priority.
What it costs. Materially more than senior debt, because the mezzanine lender ranks behind and is exposed to exactly the part of the project where risk concentrates. Expect the pricing to reflect that, and expect the total blended cost of funds to be the number that matters rather than either rate on its own.
What decides whether it is available. The senior lender's willingness to consent, the combined LTC and LTGRV across both facilities, and whether the feasibility still shows an acceptable margin after the mezzanine cost is deducted. If it does not, the deal needs more equity rather than more debt.
The mechanics of ranking, priority deeds and first mortgagee consent are covered on second mortgage loans.
Land banking and sites without approval
Holding land ahead of development is fundable, at more conservative levels. A site with no approval is assessed on its current use value rather than its development potential, which usually means an LVR in the 50% to 60% range rather than 65%.
The exit matters more here than anywhere else, because there is no construction facility waiting to refinance you. Acceptable exits are a sale of the site, a refinance once approval is granted, or a construction facility once the project is genuinely ready to start. An intention to eventually develop is not an exit.
Where the approval is in progress, the value of the facility often lies in matching the term to the planning timeline with a margin. Councils are slow in ways that are difficult to predict, and a facility that expires two months before a determination is worse than one priced slightly higher over a longer term.
What lenders assess on a development file
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The feasibility. A proper one, showing land, construction, consultants, holding costs, contingency, selling costs and margin. This is the document that decides the deal.
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Approval status. Approved, lodged, or nothing yet. Each is fundable and each prices differently.
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The exit. Senior debt refinance, sale of the site, or sell-down of completed stock. It must be specific and evidenced. More on this in bridging loan exit strategies.
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Your track record. Not a hard requirement, but a developer with three completed projects is a different risk to a first-timer, and the pricing reflects it.
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The builder and the contract. Where construction is involved, the builder's capacity, the contract type and whether it is fixed price all matter.
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The market. How comparable stock is selling in that specific location right now, which is the input most likely to have moved since you ran your numbers.
Are presales required?
This is the question that most often sends developers away from a bank and toward a private lender, so it deserves a direct answer.
Bank construction facilities generally require presales, often at a level covering a substantial share of the debt, with qualifying criteria on deposit size and purchaser type.
Private and non-bank lenders frequently do not. They price the risk instead, lending at a lower LTGRV and charging more. For a developer with genuine equity and a strong site, that trade is often better than spending six months achieving presales in a market that is not buying off the plan.
There is no free option here. No presales means a lower leverage point and a higher rate. What it buys you is time, and the ability to sell completed stock into a market rather than off a plan.
How fast can development finance settle?
A site acquisition bridge on a clean file can settle in 5 to 10 business days. Full development finance takes longer, because a quantity surveyor report and a proper feasibility review are involved. What causes delay, in order of frequency:
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The feasibility arrives late or incomplete. This is the single biggest cause. Have it ready before you enquire.
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Valuation on a development site takes longer than a standard residential valuation, particularly where the approval affects the value.
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The exit is not credible. A senior debt exit with no lender identified and no term sheet is an assumption, not an exit.
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Entity and trust documents that have to be located and reviewed.
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Existing lender consent where the facility ranks behind senior debt.
What you will need
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Site address, purchase price or current valuation, and the contract if one is on foot
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Approval status, with the determination or lodgement reference where relevant
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A feasibility showing costs, timeline, gross realisation and margin
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Your development track record, project by project
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The intended exit, with whatever evidences it
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Entity documents including the trust deed where applicable, and identification for directors, trustees and guarantors
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Builder details and the construction contract, where construction is part of the request
Financial statements are usually secondary. The feasibility and the exit carry the assessment.
Frequently asked questions
What is a bridging loan for property development?
Short-term finance secured against a development site or completed stock, used to cover timing gaps across a project. Most commonly it funds site acquisition before a construction facility is in place, covers a cost overrun or stage gap during the build, or holds completed unsold stock afterwards. It does not fund progressive construction drawdowns, which is what a senior construction facility does.
What is a residual stock loan?
Finance secured against completed, titled, unsold stock at the end of a project. It repays the construction facility when it falls due and gives you 12 to 24 months to sell the remaining stock without discounting. Typical lending is 60% to 70% of the as-is value of the unsold stock, with each unit released on settlement at an agreed partial discharge amount.
What LVR can a developer borrow to?
On a site, commonly up to 65%, occasionally 70% where an approval is in place, and lower on land without approval. Development lenders also test loan to cost, usually 75% to 80%, and loan to gross realisation, usually around 65%. The facility is capped by whichever of the three produces the smallest number.
What is the difference between LTC and LTGRV?
Loan to cost measures the loan against total development cost, including land, construction, consultants, holding costs and contingency. It determines how much equity you need. Loan to gross realisation measures the loan against the completed project's total sales value. It determines the lender's exposure if the project has to be sold. Both are tested, and LTGRV is the one that most often caps the facility.
Do I need presales?
For a bank construction facility, usually yes. For private and non-bank development finance, frequently not. Lenders who do not require presales compensate by lending at a lower loan to gross realisation and charging a higher rate. That is often a better trade than delaying a project for six months to achieve presales.
Can I get finance on a site without a development approval?
Yes, at more conservative levels. The site is assessed on current use value rather than development potential, so expect roughly 50% to 60% rather than 65%. The exit matters more than usual, because no construction facility is waiting to refinance you. A sale, or a refinance on approval, are the workable exits.
How long can development bridging run?
Typically 6 to 18 months, with residual stock facilities running to 24 months. The term should be set by the realistic timeline plus a margin, not by the optimistic one. Planning determinations and sell-downs both slip, and a facility that expires early is more expensive than a longer one priced slightly higher.
What is mezzanine finance in property development?
Funding that ranks behind the senior construction facility, usually documented as a second mortgage, used to reduce the equity a developer must contribute. It requires the senior lender's consent and a deed of priority, and it is priced well above senior debt because it carries the concentrated risk. It only works where the feasibility still shows an acceptable margin after the mezzanine cost is deducted.
Do I need a track record?
Not necessarily, but it affects pricing and leverage. First-time developers are funded regularly, usually at a lower LVR, often with a requirement for an experienced builder or project manager. A completed project history opens both cheaper pricing and higher leverage.
Can a company or trust borrow for development?
Yes, and almost all development lending is written that way. Single purpose vehicles with no trading history are standard and expected. The trust deed or constitution is reviewed to confirm borrowing and mortgaging powers, and director or trustee guarantees are required as a matter of course.
What happens if the project runs over time?
Tell the lender before the expiry date. Extensions on development facilities are common where the project is genuinely progressing, usually for a fee plus continued interest. What causes real problems is reaching expiry with stock unsold and no conversation having taken place, because that is where default pricing and enforcement begin. Build the margin into the term at the outset instead.
Speak with someone who has funded development before
Development files are decided on the feasibility and the exit, and both are easier to assess in one conversation than through an application form. Send us the site, the approval status, your feasibility and how you intend to repay.
We will tell you which facility fits the stage you are at, what the realistic leverage is against all three ratios, and whether the timeframe works. If the numbers do not support it, we will tell you that as well, and why.
Request an assessment, or read further: commercial bridging loans, second mortgage loans, interest rates, costs and fees, calculator and FAQs.
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