Development finance is the funding that turns a site into a finished, income-producing or saleable asset. It covers the land, the construction and the holding costs across the life of a project, and it is structured very differently from a standard home loan or commercial mortgage. For developers in Australia, understanding how it works is the difference between a project that funds cleanly and one that stalls between approval and settlement.
This guide explains how development finance is structured in Australia, how lenders price and size a facility, who the active lenders are and what they look for. LenderBridge has researched the criteria of 32 distinct development-finance lenders across the Australian market, from the major banks through to specialist non-bank funds and private credit. The detail below reflects that research, current as at the May 2026 research pass.
This page is general information about how the development finance market works. It is not credit assistance, a loan offer, a quote or a recommendation of any particular lender or product. Every project is different, and the right structure depends on the specifics of the site, the sponsor and the market.
What Development Finance Is
Development finance funds the creation of new property. A residential subdivision, a townhouse project, an apartment building, a commercial or industrial development, a mixed-use scheme: all of these draw on development finance to bridge the gap between buying a site and realising its end value.
The defining feature is that the loan funds a project that does not yet exist. A lender is not lending against a finished building with a known value and a tenant paying rent. It is lending against a forecast: a feasibility that says this site, plus this build, equals this end value, over this timeline. That forecast risk is why development finance is sized, priced and drawn differently from other property lending.
Funds are typically advanced in stages, not as a single lump sum. The land component may settle up front, then construction funds are released progressively against completed work, usually verified by a quantity surveyor. Interest is often capitalised, meaning it is added to the loan balance rather than paid monthly, because the project produces no income until it completes or sells. The facility is then repaid from sales or from a refinance onto a longer-term loan once the asset is built and stabilised.
Development finance also sits on a spectrum. A first-time developer building a pair of townhouses faces a different lender universe and a different set of conditions from an experienced sponsor delivering a 60-unit apartment building. The principles are the same; the scale, the pricing and the appetite shift considerably. The article on small development finance in Australia covers the lower end of that spectrum in detail, and the guide for first-time developer finance sets out what changes when a developer has no completed-project track record.
How Development Finance Is Priced and Structured
Property development loans are priced on risk, not on a published rate card. Where a home loan advertises a single headline rate, development finance is assembled from several moving parts that together reflect how risky the lender judges the project to be.
The main components are typically an establishment or line fee charged up front, an interest margin that accrues over the term, and sometimes an exit or realisation fee payable when the facility is repaid. The interest is usually capitalised. Specialist and private lenders may also take a share of profit on higher-leverage deals. Development finance rates are therefore best understood as a total cost of capital across the project, not a single percentage figure.
What moves the pricing is risk. Lower leverage, strong pre-sales, an experienced sponsor, a simple build and a liquid market all push pricing down. Higher leverage, thin or no pre-sales, a first-time developer, a complex build or a soft market all push it up. The same project can attract materially different terms from a major bank, a non-bank lender and a private credit fund, because each prices that risk through a different lens. The piece on what fast property finance costs in Australia explains why speed and flexibility carry a price, and where that trade-off makes sense.
LTC and LVR in Development Finance
Two ratios govern how much a lender will advance, and developers often confuse them. Loan to value ratio (LVR) measures the loan against the value of the asset, usually the gross realisation value or the end value of the completed project. Loan to cost ratio (LTC) measures the loan against the total development cost, meaning land plus construction plus all soft costs and holding costs.
Development lenders care about both, and a facility is usually capped by whichever ratio binds first. A lender might offer up to a certain percentage of total cost and up to a certain percentage of end value, and the developer can draw only up to the lower of the two limits. LTC controls how much equity the developer must contribute. LVR controls the lender's buffer against a soft sales result. Understanding which ratio is constraining a deal tells a developer whether the gap is an equity problem or a value problem, and that points to a different solution for each.
How Much Can I Borrow for a Development
There is no single answer, because the limit is set by the ratios above, the strength of the feasibility and the lender tier. A senior bank facility on a well-pre-sold project with an experienced sponsor sits at one end. A stretched facility from a non-bank or private lender, layered with mezzanine or preferred equity to lift total leverage, sits at the other. The more of the capital stack a developer fills with debt, the higher the cost of that capital, and the more the lender will scrutinise the exit.
The practical way to answer the borrowing question is to model the feasibility, establish the total development cost and the gross realisation, then test which lender tier the project fits. The LenderBridge construction loan calculator is a useful starting point for sketching the funding shape of a project before approaching lenders.
The Development Finance Capital Stack
Most developments are not funded by a single loan. They are funded by a stack of capital, each layer carrying a different level of risk, a different cost and a different claim on the project's cash flows. Understanding the stack is essential to understanding how a development is actually financed.
At the base sits senior debt, the largest and cheapest layer, secured by a first mortgage and repaid first. Above it, stretch senior describes a senior facility pushed to a higher leverage point, often by a non-bank lender willing to lend deeper into the cost stack than a major bank would. Mezzanine finance sits above the senior debt, taking a second-ranking position, costing more because it is repaid after the senior lender and carrying more risk. Preferred equity sits higher still, blurring the line between debt and equity, typically the most expensive layer and the last to be repaid before the developer's own equity.
Each layer added above the senior debt lifts total leverage, which means the developer contributes less of their own equity, but it raises the blended cost of capital and tightens the margin for error on the exit. The full mechanics of how these layers fit together, who provides each one and how they are negotiated are set out in the detailed guide to the development finance capital stack.
Pre-Sales and Why Lenders Require Them
Pre-sales are sales contracts exchanged on units or lots before construction is complete, often before it has started. For many development lenders, particularly the banks, pre-sales are a precondition of funding. They are the lender's evidence that real demand exists at the assumed price, and they de-risk the exit by locking in a portion of the end revenue before a single brick is laid.
How many pre-sales a lender requires varies widely by lender type, project and market. A major bank may require pre-sales sufficient to cover a large share of the debt, expressed as a debt-cover ratio. A non-bank or private lender may require fewer pre-sales, or none at all, in exchange for higher pricing and lower leverage. This difference in pre-sale appetite is one of the clearest dividing lines between lender types, and it often determines which lenders a project can realistically approach. The detail on qualifying pre-sales, debt cover and how the requirement shifts by lender is covered in the guide to pre-sales in development finance.
Residual Stock and Land Bank Finance
Development finance does not end when construction does. Two related facilities address the stages either side of the build.
Residual stock finance funds the unsold units left at the end of a project once the construction facility falls due. Rather than discounting stock to repay the senior lender by the deadline, a developer can refinance the completed, unsold dwellings onto a residual stock facility, releasing the pressure to fire-sale and giving time to achieve full value. The mechanics, the typical leverage and the lenders active in this space are covered in the guide to residual stock finance in Australia.
Land bank finance sits at the other end, funding the acquisition and holding of a site before development begins, whether the developer is awaiting planning approval, assembling adjoining parcels or timing the market. It is generally lower-leverage than construction finance because the land produces little or no income, and it draws on a different set of lenders again.
Who Lends: Banks, Non-Banks, Specialist Funds and Private Credit
The Australian development finance market is not one market. It is a layered set of lenders, each occupying a different position on risk, pricing, speed and leverage. Matching a project to the right tier is the single most important decision a developer makes when arranging finance.
The major and second-tier banks offer the cheapest senior debt, but on the tightest terms: lower leverage, strong pre-sale requirements, conservative valuations and longer approval timelines. They suit experienced developers with well-pre-sold projects in established markets.
Non-bank lenders lend deeper into the cost stack, accept lighter pre-sales and move faster, at a higher cost than the banks. They have become a large part of the development funding market and often fill the gap for projects the banks decline on leverage or pre-sales grounds.
Specialist development funds and private credit sit at the highest-leverage, highest-cost, fastest-moving end. They will fund projects with no pre-sales, complex sites or first-time sponsors, and they price accordingly. For a project on a tight timeline or one that does not fit a bank's box, this tier is often the only route.
A developer's location adds another layer, because lender appetite is not uniform across the country. A lender active in metropolitan Sydney or Melbourne may have little appetite in a regional market, and a regionally-focused lender may price a capital-city deal out of the running. The interaction of lender type and location is set out in the analysis of lender location appetite across Australia, and the lower end of the developer market specifically is covered in the guide to small development finance.
Development Finance Versus Bridging Finance
Developers often reach for the wrong tool. Bridging finance and development finance solve different problems, and using one where the other is needed costs time and money. Bridging finance is short-term funding to cover a timing gap, for example holding a settled site while longer-term funding is arranged, or covering the window between buying and selling. Development finance funds the build itself, staged across the project. A project may use both in sequence, bridging to secure and hold the site, then development finance to construct. The distinction, and when each is the right choice, is set out in the comparison of bridging versus development finance.
How LenderBridge Fits
The hardest part of arranging development finance is not the paperwork. It is knowing which of the many lenders in the market will actually fund a given project, at what leverage and on what terms, before spending weeks approaching the wrong ones. The market is fragmented, criteria are rarely published and appetite shifts constantly.
LenderBridge has mapped the development-finance criteria of 32 distinct lenders across the Australian market, from the major banks through non-bank lenders to specialist funds and private credit, with coverage Australia-wide. Those 32 development lenders sit within a wider researched panel of 297 Australian lenders across 19 categories. The Lender Match tool takes a project's parameters and surfaces the lenders whose stated criteria fit, so a developer can focus on the lenders genuinely worth approaching rather than working through the market blind.
Frequently Asked Questions
What is development finance?
Development finance is staged funding used to build new property, covering land, construction and holding costs across a project. Unlike a standard mortgage, it funds an asset that does not yet exist, is usually drawn progressively against completed work and is repaid from sales or a refinance once the project completes.
What is the difference between LTC and LVR in development finance?
Loan to cost ratio (LTC) measures the loan against total development cost, meaning land plus construction plus soft costs. Loan to value ratio (LVR) measures the loan against the project's end value. A development facility is usually capped by whichever of the two limits binds first.
Do I need pre-sales to get development finance?
It depends on the lender. Many banks require pre-sales as a condition of funding, because they de-risk the exit. Some non-bank and private lenders accept fewer pre-sales, or none, in exchange for higher pricing and lower leverage. Pre-sale appetite is one of the clearest differences between lender types.
How much can I borrow for a property development?
The amount is set by the loan to cost and loan to value limits, the strength of the feasibility and the lender tier. Senior bank facilities sit at lower leverage and lower cost. Stretched facilities with mezzanine or preferred equity lift total leverage at a higher cost of capital. Modelling the feasibility first establishes the realistic range.
Who lends for property development in Australia?
Development finance is provided by major and second-tier banks, non-bank lenders, specialist development funds and private credit lenders. Each occupies a different position on cost, leverage, speed and pre-sale requirements. Lender appetite also varies by location, so matching a project to the right tier and region matters.
Can a first-time developer get development finance?
Yes, though the lender universe is narrower and the conditions are tighter than for an experienced sponsor. First-time developers typically face lower leverage, stronger pre-sale or equity requirements and closer scrutiny of the build team. Specialist and non-bank lenders are often more open to first projects than the major banks.
General information only, not credit assistance or financial product advice. LenderBridge connects borrowers and lenders; it does not advise or recommend. Verify figures with a lender.