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Development Finance

Can First Time Developers Get Finance?

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Quick answer

Yes, some lenders will consider

1st time developers

When the project, equity and team are strong enough

  • Typical equity contribution 20-35%
  • Target profit lenders like to see 15-20%+
  • Best starting point Smaller projects
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Yes, first time developers can get finance in Australia, but approval is usually harder than it is for experienced developers. Lenders tend to place more weight on the quality of the site, the strength of the feasibility, the amount of equity available, and the experience of the wider project team.

For a new developer, the deal itself often needs to be cleaner, smaller, and easier to understand. A simple townhouse, duplex or low rise residential project will usually be easier to fund than a large apartment or mixed use development.

In practice, lenders want comfort that the project can still be delivered successfully even if the borrower has not completed a development before. That is why the builder, architect, town planner, quantity surveyor and contingency planning can matter almost as much as the borrower's own background.

What first time developers are most likely to get funded for

Not every first project is viewed the same way by lenders. New developers generally have the best chance when the project is relatively straightforward, the end market is well understood, and construction risk is manageable.

The more complex the approval pathway, build methodology, sales strategy or exit strategy, the more difficult funding can become for someone without a development track record.

Projects that may be more suitable for a first time development finance application include:

  • iconDuplex and dual occupancy projects
  • iconSmall townhouse developments
  • iconSimple house and land or knock down rebuild projects
  • iconLow rise residential developments
  • iconSmall land subdivision projects
  • iconProjects supported by an experienced builder or project manager

How lenders look at a first time developer deal

A lender does not only ask whether the borrower has developed before. It also asks whether the project has been designed and structured in a way that reduces risk.

For first time developers, the assessment usually focuses on the layers of support around the project as much as the borrower themselves.

A typical lender review may move through stages such as:

  • 01 Site quality and location
  • →
  • 02 Plans and approvals
  • →
  • 03 Costing and feasibility
  • →
  • 04 Equity and liquidity
  • →
  • 05 Builder and consultant team
  • →
  • 06 Exit strategy and market demand

This is why many first time developers can still obtain finance when the deal is well packaged, even if their own direct development history is limited.

How much can a first time developer borrow?

There is no single rule, but many development loans are assessed on either total development cost or end value, with the exact leverage depending on the lender, the project and the perceived risk of the borrower.

Method 01

Loan to value ratio

Some lenders assess the loan against the current or as if complete value of the property and compare the debt amount to that value.

Method 02

Loan to total development cost

Other lenders focus on the total cost of the land, construction, professional fees, interest and contingency, then lend a percentage of that figure.

Common funding range 60-75%
  • Lender funds a portion of total development cost or value
  • Developer contributes the balance through cash or equity

For a first time developer, leverage may sit toward the conservative end unless the project is strong and the supporting team is experienced. The cleaner and simpler the proposal, the easier it usually is to achieve a competitive structure.

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What lenders want to see from a first time developer

Experience helps, but it is rarely the only decision point. A first time developer is more likely to be approved when the key parts of the project have already been thought through properly.

Lenders will usually expect a well prepared feasibility showing that the project is commercially sensible and that the budget contains enough buffer for cost overruns and delays.

That feasibility often needs to include:

  • iconLand purchase and acquisition costs
  • iconDetailed construction costs
  • iconProfessional fees and statutory charges
  • iconInterest, holding costs and selling costs
  • iconContingency allowances and time buffers
  • iconEvidence supporting end values or sale prices
  • iconBuilder credentials and consultant details
  • iconA clear repayment or exit strategy
15 - 20 %
Many lenders want to see a profit margin of around 15 percent to 20 percent or more. For a first time developer, a thin margin can quickly make the application difficult because there is less room for mistakes.

How first time developers strengthen an application

The goal is to make the deal feel less like a first project and more like a well controlled project.

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Use an experienced team

An experienced builder, quantity surveyor, architect, planner or project manager can materially improve lender confidence.

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Start with a simpler project

Smaller low rise developments are usually easier for a new developer to fund than large or highly technical projects.

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Provide more equity

A stronger deposit or additional equity can help offset the lack of direct development experience and reduce lender risk.

Common problems first time developers face

Most first time development finance issues are not caused by being new alone. They are usually caused by a weak proposal, insufficient buffers, or a project that is too ambitious for a first attempt.

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Not enough equity

First time developers often underestimate how much cash or property equity they need to contribute.

Possible solutions include:
  • icon Using equity from another property
  • icon Bringing in a joint venture partner
  • icon Reducing project scale to fit available capital
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Project is too large for a first deal

A new developer trying to fund a large apartment or mixed use project may find mainstream options very limited.

Ways to improve the position include:
  • icon Starting with a smaller staged project
  • icon Adding an experienced development partner
  • icon Demonstrating strong external project management
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Weak feasibility or thin margin

If the end values are optimistic or the profit margin is too slim, lenders may see no buffer for delays, valuation changes or cost overruns.

This can sometimes be improved by:
  • icon Reworking design efficiency or yield
  • icon Tightening build costs and contingencies
  • icon Using better comparable sales evidence
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Inexperience in the delivery team

If both the developer and the surrounding consultants are inexperienced, lenders may consider the execution risk too high.

Solutions may include:
  • icon Engaging an experienced builder with proven similar projects
  • icon Using a professional project manager or development manager
  • icon Providing detailed documentation and risk controls
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Steps a first time developer can take to improve approval chances

Step

01

Choose a project that is realistic for a first development and in a market with proven buyer demand

Step

02

Obtain plans, due diligence and approvals, or at least show a credible pathway to them

Step

03

Prepare a detailed feasibility study with realistic costs, sales evidence and contingency allowances

Step

04

Assemble the right team including builder, planner, architect, valuer and if needed a development manager

Step

05

Identify your equity contribution and whether presales, guarantees or additional security may be needed

Step

06

Submit the deal to lenders that are comfortable with first time developers rather than relying only on standard bank policy

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Speak with a Development Finance Specialist

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First time development finance is rarely just about whether you have done a project before. It is usually about how the whole proposal stacks up, from site selection through to delivery and exit.

A specialist can review the strength of your deal, identify likely lender concerns, and help position the application more effectively.

Speak with a finance specialist about your first development project.

Submit the short form below and a development finance specialist will review your scenario and discuss which funding options may be available.

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