Securing property development finance through a traditional bank can feel like navigating a maze of red tape. For many developers in Australia, particularly those tackling mid-sized or time-sensitive projects, the hurdles of bank lending, from strict criteria to long processing times, can halt progress before the first brick is laid.
Fortunately, there are alternative property finance options available that offer greater flexibility and efficiency.
Non-bank development loans may be the solution.
In this article, we explore how to secure development finance without a bank, why private lenders are becoming a go-to solution for property developers, and how Pacific 8 can help fund your next project.
Why Banks Often Say No to Property Developers
Traditional banks are conservative by design. They follow rigid lending rules and often prioritise low-risk, long-term borrowers.
For property developers, this creates several challenges:
- Strict Lending Criteria: Banks assess applications based on tight credit scoring, full income verification, and extensive documentation.
- LVR Caps: Most banks won’t fund more than 65-70% of the project’s end value (Loan-to-Value Ratio).
- Presale Requirements: Developers are usually required to pre-sell a significant portion of the project before funds are released.
- Slow Approvals: Bank loans often take 6–12 weeks to process, which can derail time-sensitive opportunities.
- Limited Appetite for Complex Projects: Projects outside the box—like boutique developments, mixed-use spaces or those involving rezoning—are often seen as too risky.
The result? Many viable projects are left unfunded or delayed, not because they lack merit, but because they don’t fit a bank’s narrow profile.
What Is Private Development Finance?
Private development finance refers to loans offered by non-bank lenders, typically private institutions or funds that provide flexible capital secured against property. Unlike banks, these lenders take a more pragmatic, asset-based approach. Instead of relying solely on credit scores and rigid formulas, private lenders assess the project’s overall viability and security.
Key features of non-bank development loans include:
- Faster approvals: Often within days, not weeks
- Flexible terms: Tailored to suit the project, not a one-size-fits-all model
- Shorter terms: Typically, 6–24 months, ideal for bridging, construction or residual stock loans
- Loan secured by property: Less reliance on the borrower’s financial history
In essence, private lender property development loans focus on the strength of the deal, not just the borrower’s background.
Types of Development Finance Without a Bank
Private lenders offer a range of alternative property finance options in Australia, catering to different stages of the development process. These include:
1. Land Acquisition Loans
Funding to purchase development-ready land or land with potential rezoning upside. Often used when speed is essential to secure a site.
2. Construction Funding
Stage-based funding to cover build costs, typically drawn down in instalments (e.g. slab, frame, lock-up, completion). Private lenders are often more flexible in their draw schedules than banks.
3. Residual Stock Loans
Once a project is completed, but not all units are sold, a residual stock loan can help free up equity, allowing developers to begin their next project while waiting for sales to settle.
Benefits of Private Lending for Developers
Working with a private lender like Pacific 8 offers several compelling advantages:
- Speed to Capital: You can access funds quickly, helping you move fast on purchases or commence construction without delay.
- Flexibility: Terms are negotiated on a case-by-case basis, making it easier to tailor finance to your unique project needs.
- Asset-Based Lending: Approval is based more on project potential and property value, not just your financials.
- Fewer Presales Required: Private lenders may fund construction with fewer or no presales, depending on the LVR and risk profile.
- Creative Structuring: Loans can be structured creatively using mezzanine finance, second mortgages, or bridging components.
In short, private lending removes many of the traditional roadblocks developers face.
LVR and Presale Requirements Explained
Understanding the Loan-to-Value Ratio (LVR) is crucial. LVR is the percentage of the loan compared to the value of the property or end value of the development.
- For land acquisition: Most private lenders will go up to 65–70% of the land’s value.
- For construction funding: LVR is usually calculated on the Gross Realised Value (GRV), often capped at 65–70%.
- Presale requirements: While some private lenders require presales to de-risk the project, others may fund based on strong feasibility, a solid builder, and a clear exit strategy.
Private lenders offer more nuanced assessments than banks, meaning even projects without a long pre-sales list can be viable.
How Pacific 8 Structures Development Loans
At Pacific 8, we work closely with property developers across Australia to provide strategic, tailored funding.
Our typical loan structure includes:
- Initial Due Diligence: We assess the project, borrower, and security offered.
- Stage-Based Drawdowns: Funds are released in line with build milestones and verified through inspections or QS reports.
- Transparent Terms: Our loans are short-term (usually 6–18 months), with clear exit strategies required (e.g. refinance or sales).
- Risk Management: Conservative LVRs and thorough due diligence to protect all parties.
- Ongoing Communication: We maintain open lines of communication throughout the project lifecycle.
With a deep understanding of development risk and return, our team can support everything from boutique townhouse builds to multi-lot subdivisions.
What Developers Need to Apply
To secure non-bank development finance, developers should be ready to provide:
- Feasibility study: Outlining project costs, revenue projections, and ROI
- Planning permits or DA approval: Depending on the stage of development
- Building contracts: Ideally, fixed-price with a licensed builder
- Presale schedule (if available): Evidence of contracts
- Statement of Assets & Liabilities: Support risk assessment
- Exit strategy: Showing how the loan will be repaid (sale or refinance)
Having this documentation in order significantly improves approval speed.
Secure Your Property Development Finance with Pacific 8
If you’re a property developer looking for fast, flexible finance, working with a private lender for property development could be the key to unlocking your next project. Whether you need construction finance, land acquisition funding, or residual stock loans, Pacific 8 offers tailored solutions without the slowdowns of traditional banking.
Contact us today to explore your options for development finance without a bank and discover how Pacific 8 can support your success in Australia’s property market.
