OUR SERVICES / DEVELOPMENT FINANCE
Structure your project for success with the help of experienced development finance brokers.
Development Financing is generally (but not always!) the most complex type of lending. There are a wide range of options when considering how to fund a development project, and they’re always pretty expensive due to the higher risks involved.
We generally recommend coming to us with a rough feasibility calculation if a site hasn’t yet been acquired. That way, we can put together a budget and financing plan before you find the site. Once you find the site, we’ll require a detailed feasibility to help us understand your project and discuss it with the lenders.
Types of financing we can look at include:
These can sometimes be done as a retail loan (i.e. normal residential 30 year term). In other words: purchase land, demo/build 4 dwellings, subdivide, and sell. That can be put through as a regular construction loan with 4 dwellings or less, then we can ask for consent to subdivide on completion.
Private lending for development is generally a good option for owner-builders, fast-moving-projects, and those using existing equity.
• Rates at RBA + 6% (varies quite a lot)
• Fairly simple and quick approvals
• Can be released as cash
This can be done per-project and has no affordability or serviceability requirements. It’s a 1–2 year loan term (generally RBA + 6%) with interest capitalised. Senior funders can generally fund the lower of 80% of GST-exclusive costs or 70% of the GST-exclusive Gross Realization Value.
This is generally the hardest way to fund a commercial development. They will look at lower LVRs, pre-sales, and scrutinize your experience as a developer.
Take 75% of the value of any unsold stock to fund your next project whilst you wait for it to sell.
Mezzanine finance or second-mortgage funding is an expensive option used to bridge funding gaps or cover unexpected project costs. Despite being expensive, it can still be used to increase cash-on-cash returns,get a larger project off the ground, or free up funds to acquire your next site.
Every project is different and requires extensive due diligence before proceeding. We are okay with developers with limited experience as long as they have at least 20% of the project costs (plus liquid assets to cover GST gaps), but we don’t recommend you take it lightly.
It’s a high-risk, high-reward investment, so we recommend you take the time to research fully.
Get in touch with experienced brokers for private development loans, micro developments, mezzanine finance, and more. Give Blue Fox Finance a call on 07 3496 9570 or contact us online!
