Quick answer
Small and mid-sized property developers usually need finance at the edges of a project: a land deposit or settlement, holding costs while a DA is assessed, an equity shortfall before the construction lender will draw, and unsold stock at completion. Caveat and second mortgage loans, land loans, bridging finance and residual stock loans fill those gaps. Lenders focus on the exit, your track record and your feasibility.
Key points
- Most small developers have their construction loan sorted; it's the deposit, DA period, equity gap and unsold stock that need separate funding
- Buyers of new residential property generally withhold GST and pay it straight to the ATO at settlement, so less cash arrives to clear your debt
- NSW's Pre-sale Finance Guarantee can commit to buying up to 75% of dwellings on projects under 20 homes, helping meet presale hurdles
- Victoria's windfall gains tax applies when rezoning lifts land value by more than $100,000, which can change a land-banking feasibility
- Every lender in this space starts with one question: exactly how and when does this loan get repaid?
A development project is rarely funded by one loan. The construction facility gets the attention, but it only covers the middle of the job. Before it: a site deposit, settlement, planning consultants, council fees and months of holding costs. After it: dwellings that haven’t sold yet and a construction lender who wants repaying on schedule.
Those edges are where small and mid-sized developers most often come looking for help, and where a missed deadline can cost a site or force a discounted sale. This page focuses on them.
Where in a project do developers need extra funding?
| Stage | What usually needs funding | Finance that tends to fit |
|---|---|---|
| Securing the site | Deposit, option fee, early settlement | Caveat loans, second mortgages over other property |
| Planning and approvals | Land holding costs, consultants, council and DA fees | Land loans, bridging finance |
| Before construction draws | Equity shortfall below the senior lender’s limit | Mezzanine finance, second mortgages |
| Construction | Progress payments to the builder | Construction and development finance |
| Completion | Unsold dwellings, construction loan maturity | Residual stock loans |
Our range runs from $5k to $5m, so we’re most useful for the first, second, third and last rows on small and mid-sized projects. The construction facility on a larger build usually sits with a bank or specialist development financier.
How do lenders size and assess a developer?
Development lenders think in terms of cost and end value rather than turnover. Two ratios come up constantly: the loan as a share of total development cost, known as loan to cost, and the loan as a share of the projected sale value of all dwellings once complete. The lower of the two usually sets the ceiling.
Beyond the numbers, assessors want to know:
- Your track record. Completed projects of a similar size and type count for a lot. A first project of four townhouses gets a different reception from a fourteenth.
- The builder. A fixed-price contract with an established, licensed builder reduces the lender’s risk.
- The feasibility. Realistic sale prices backed by recent comparable sales, a contingency allowance, and a margin that survives a modest price fall.
- Presales. Banks commonly want qualifying presales before funding construction. Non-banks may accept fewer.
- The exit. For every short-term facility, the lender wants a specific refinance or sale event, with a date.
Our development finance vs construction loan comparison explains how the senior facility itself is usually structured.
Three details that change a developer’s numbers in 2026
GST arrives at the ATO, not with you. Since 1 July 2018, buyers of new residential premises and new subdivided lots have generally withheld the GST from the price and paid it to the ATO at settlement. The developer receives the net amount and claims a credit for the withheld GST in their BAS. If your feasibility assumes the full contract price lands at settlement and goes straight to the construction lender, the shortfall can be significant. Model repayments on net proceeds.
NSW will help some projects over the presale hurdle. The state’s Pre-sale Finance Guarantee commits the government to buying a share of off-the-plan dwellings at a discount of at least 10% to market value, so the developer can meet a lender’s presale condition. For projects with fewer than 20 dwellings, the commitment can cover up to 75% of homes, capped at $30 million. Projects need at least four homes, planning approval, a lender requiring presales, and the ability to start building within six months. There are application and establishment fees and an ongoing line fee, so build those into the feasibility.
Rezoning can trigger tax in Victoria. The windfall gains tax applies where a government rezoning lifts a property’s value by more than $100,000. Owners may defer paying it, with interest accruing, until a later dutiable dealing with the land or a 30-year limit, whichever arrives first. For developers holding land for a future rezoning, a deferred liability sitting over the title can reduce the loan a site will support.
Got a site settlement or DA period that needs funding now? Outline the project for us so a specialist can assess the gap.
What risks make lenders cautious about developers?
Cost blowouts. Building material and labour costs have been volatile, and a builder collapse mid-project can leave a developer funding a replacement contract at a higher price.
Valuation gaps. If the valuer’s view of end values sits below your feasibility, every leverage ratio tightens and the equity you need goes up.
Slow sales at completion. Unsold stock as the construction loan matures is one of the most common reasons developers look for short-term funding. A residual stock loan arranged early is far less stressful than one arranged in the last fortnight.
Regulatory attention on private lending. ASIC’s 2025 report on private credit put the domestic market at around $200 billion, with commercial real estate debt making up roughly half. That scrutiny has made reputable non-bank lenders more careful with valuations and documentation, which is good for borrowers but adds steps.
Documents to prepare
- Contract for the site, and title search for any property offered as security
- Development approval or current status of the application
- Feasibility study with cost plan, contingency and sale price assumptions
- Builder’s contract and the builder’s licence and experience
- Presale contracts, if any, and agent’s sales advice
- Your track record: past projects, sizes and outcomes
- Financials for the developing entity and personal statements of position for guarantors
- A written exit plan for each facility, with dates
Illustrative example: a townhouse project caught between stages
This is a hypothetical scenario. A developer in Brisbane’s outer suburbs is building six townhouses. The construction loan has been approved, but the lender requires the developer’s equity contribution to be fully spent before it advances funds, and a cost increase has left a $340k shortfall.
Separately, the developer holds an investment apartment with no debt against it. That apartment becomes security for a 12-month second mortgage that fills the hole. The exit is clear: the sale of three townhouses that are already under contract, after the construction loan is repaid.
At completion, two townhouses remain unsold. Rather than discounting them, the developer refinances the remaining construction debt into a residual stock loan, which reduces as each settles. The second mortgage is cleared from the presold settlements, after accounting for the GST withheld by each buyer.
Funding the next stage of your project
Development is a sequence of deadlines, and a funding gap at any stage can hold the whole project up. The right short-term facility, arranged with a clear exit, keeps it moving.
Sending us the basics is a sixty-second job, and nobody runs a credit check on you for doing it. Your project isn’t blasted around the market either; developers know how quickly a site gets shopped once its details leak. Instead, someone who understands staged funding reviews the deal and rings you. Be precise about land value, costs to complete, equity in and the exit, because a feasibility that holds up on paper is what gets the structure right the first time.
Frequently asked questions
Can I borrow for a development site deposit before I have a DA?
Yes. Short-term property-secured lending, such as a caveat or second mortgage loan over property you already own, is a common way to fund a deposit or early settlement. The lender will want to see the contract, your equity, and a credible plan for refinancing once the DA is approved.
What is a residual stock loan?
It's a loan secured over completed but unsold dwellings. It repays the construction lender so you can keep selling without a fire sale, and the balance reduces as each unit settles. Lenders size it on the valuation of the remaining stock.
How does GST withholding affect a developer's settlement?
When you sell new residential premises, the buyer generally withholds the GST and pays it directly to the ATO at settlement. You then claim a credit for it in your BAS. Your settlement proceeds are therefore lower than the contract price, so plan your debt repayments around the net figure.
Do I need presales to get development funding?
Banks commonly ask for qualifying presales before they'll fund construction. Non-bank and private lenders may accept fewer or none, at a higher total cost. Some state programs, such as the NSW Pre-sale Finance Guarantee, can help eligible projects meet a lender's presale condition.
Will a lender fund a first-time developer?
It's harder, but small projects like a duplex or a few townhouses are often funded if the developer brings meaningful equity, uses an experienced builder on a fixed-price contract, and has a realistic feasibility study. Expect lower leverage than an experienced developer would get.
Is development finance something you arrange?
Our enquiries cover $5k to $5m, so we mostly help small and mid-sized developers with deposits, gap funding, bridging and residual stock. Large construction facilities are usually arranged directly with banks or specialist development financiers.