Development Finance

It is well known that to secure development finance from a major bank is getting much more difficult. Like the GFC days when it was virtually impossible we are returning to very tight controls. We suspect that is to protect the banks mortgage books from being impacted by over supply. Banks are now often requiring 100% of debt coverage from pre sales and they have pulled back on the percentage of hard costs that they will fund.

We have access to non bank lenders, private equity and private lenders that do not normally require any pre sales at all. They will also approach the way they look at a project from a different angle to the major banks. Namely, these developer finance lenders will work off the gross realisation value (GRV) of the project rather than the traditional hard cost or total development cost (TDC) method when working out how much they will lend.

The main things non traditional development finance lenders will look at are:

• The Project – does it make sense?
• The Profit – is there a big enough profit in the project ?
• The People – are the people behind the development experienced?