Who lends for commercial construction and development?

Construction lending is a specialist corner of the market. A lender isn’t just lending against a business or a property; it’s lending against something that doesn’t exist yet. That changes everything about how the deal is assessed, how funds are released and which lenders are willing to take it on.

This page covers construction and development projects — building or substantially renovating commercial, industrial, mixed-use or multi-unit property. If you’re a builder or trade contractor needing working capital between progress payments, skip to the section near the end.

Which lenders fund construction projects?

Lender type	Appetite	Typically wants
Major and regional banks	Lower-risk projects, experienced developers	Strong pre-sales or pre-leases, significant equity, fixed-price contract
Non-bank construction lenders	Mid-size projects, more flexibility	Fewer pre-sales, solid equity, credible builder
Private lenders	Smaller or time-critical projects, residual stock, land	Clear exit, conservative loan-to-value
Mezzanine and preferred-equity funders	Topping up senior debt	Higher return, sits behind the main lender

How does a construction loan work?

1. Approval based on the land, plans, permits, budget, contract and feasibility.
2. Land or initial advance, sometimes refinancing existing land debt.
3. Progress draws at agreed stages — slab, frame, lock-up, fixing, completion — each checked by the lender’s quantity surveyor.
4. Cost-to-complete tests before each draw: the remaining facility must cover the rest of the build.
5. Exit at completion: sale of units, refinance to an investment loan, or a lease-backed commercial facility.

Interest is often capitalised during the build, adding to the balance rather than being paid monthly.

What does a construction lender assess?

• The builder. Licence, track record, financial strength and the building contract (fixed-price contracts are preferred).
• The project. Plans, permits, location, the type of property and demand for it.
• The numbers. Budget, contingency, feasibility and the margin if things go wrong.
• Your equity. How much of your own money is in the deal.
• Pre-sales or pre-leases. Especially for banks.
• The exit. Sales, refinance or lease, and how realistic each is in the current market.

Have a project in mind and wondering which part of the market will take it? Talk it through with a specialist — there’s no credit check to ask.

Why do construction loans get declined?

• Not enough equity once costs and contingency are counted.
• A builder with limited experience or financial strength, or a cost-plus contract.
• Pre-sales below the lender’s requirement.
• Permits not in place.
• A feasibility that relies on optimistic sale prices.
• An exit that depends on a refinance the borrower may not qualify for.

What about builders and trades needing working capital?

Builders, subcontractors and trade businesses often face a different problem: paying for labour, materials and plant weeks before a progress payment or claim is paid, with retentions held back on top. That isn’t a construction loan; it’s a cash-flow need. Lender types that commonly help:

• Invoice finance providers, though progress claims and retentions need careful structuring.
• Lines of credit from non-bank or online lenders.
• Property-backed loans for larger or longer gaps.
• Asset financiers for plant and vehicles, freeing cash for operations.

See who lends for working capital for more detail.

How do you prepare a construction finance application?

Assemble a single pack: plans and permits, the building contract, the builder’s credentials, a detailed budget with contingency, a feasibility, evidence of your equity, pre-sale or pre-lease contracts, and your exit plan. A complete, well-organised pack is the biggest single factor in how smoothly a construction application runs. Small businesses should also be aware that standard-form contracts, including loan contracts, are covered by unfair contract term protections that ASIC administers.

What does a quantity surveyor’s report mean for you?

Before each drawdown, the lender’s quantity surveyor checks the work against the budget and the stage claimed. If the builder has claimed more than the work completed, or if the cost to complete now exceeds the undrawn facility, the draw can be reduced or held until you fund the difference. That’s why a realistic contingency and an experienced builder matter so much: they keep the draws flowing on schedule and protect you from funding shortfalls mid-build.

Quick checklist before you approach a construction lender

• Approved plans and permits.
• The signed building contract and the builder’s licence and track record.
• A detailed budget with contingency and a feasibility study.
• Evidence of your equity and any pre-sales or pre-leases.
• A written exit plan: sale, refinance or lease.
• Your own experience with similar projects, if any.

A lender who receives this pack complete on day one can usually give you a clear indication quickly. A lender who has to chase each item will take longer and may assume the project is less organised than it is.

Finally, remember that a construction facility is usually only one part of the funding. Land settlement, professional fees before the build starts, and holding costs after completion all need to be covered too. Ask your lender which of these it will fund and plan your own cash for the rest.

Planning a build?

Construction finance rewards early preparation. Send a 60-second enquiry outlining the project and your equity, and a lending specialist will tell you which lender type is realistic and what it will need to see. No credit check to ask, your project details aren’t sent to a crowd of lenders, and the more accurately you describe the build, the better we can match it first time.