Finance Options for Developers that won’t be provided by your bank


It’s no secret that banks have recently started to tighten requirements when it comes to financing projects. Recent media hype has made it harder for Developers with feasible projects to arrange finance in a timely and efficient way.

It’s also not uncommon to have a banks’s relationship manager offer a developer one thing, only to have the credit hierarchy come back with another.

Fortunately there are strong finance alternatives available to developers that offer speed to settlement, consistency in the decision making process, flexibility and sound advice.

Examples of Funding Options that are available outside of the Banks include:

  1. Access to Preferential Equity (PE). As a guide, the Banks will fund to 75 per cent of Total Project Cost. PE providers will, for the right projects, top this up to 90 per cent TDC. This equity underpin enables Clients to spread their cash equity across more projects whilst still maintaining a healthy return on equity.Preferential Equity can also be used to reduce the Senior Bank debt to a level that marries up with the presales that have so far been achieved. A client may have achieved debt cover to 65 per cent however by injecting PE to a certain level, the current pre-sale level equates to 100 per cent net debt cover.
  2. Blended first mortgage. This is a version of private funding at elevated loan to value ratios with a pro rata elevated interest rate. This is “pricing for risk” and is another alternative to Preferential Equity. This works effectively when presales achieved are well below what the Bank requires and the equity falls short of Bank hurdles.
  3. 100 per cent net debt cover on pre-sales. This is funding from Non- Bank and Private Mortgage counter-parties for all project sizes with net debt cover from zero for smaller projects to circa 50 per cent for larger projects. This enables developers to commence their project and not be burdened by gaining more presales and the cost associated with trying to achieve this
  4. Land Bank Funding – Specific finance for Land banks that are in the process of securing a Development Consent. In certain instances, the DA lodged (or about to be lodged), is complicit with Planning for that given zoning. The Funder takes the view (following due diligence on Planning Risk) that Council are supportive of the Application so the risk of the Application being rejected is nominal. DFP recently secured 55 per cent LVR on a Land bank with no DA.

If you are seeking more flexibility and quicker turnaround times when it comes to funding your development projects,

Development Finance Partners can provide expert advice and solutions.

Image credit: CRN Australia

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