A Broker's Checklist for a Development Finance Submission

Key takeaways

• Lead with a one-page deal summary: facility, LVR on gross realisation, loan to cost, pre-sale cover, equity and exit.
• In the illustrative deal, a $5.55 million facility is 75% of a $7.4 million cost and 57.8% of a $9.6 million gross realisation.
• A feasibility that only works at today's prices will not survive credit - show the margin after a 10% price fall and a 10% construction overrun.
• Pre-sales to related parties, or with long sunset dates and thin deposits, may not count towards a lender's cover requirement.
• Evidence equity: cash in the bank, land equity supported by a valuation, and where every dollar came from.
• Know the regime: a loan to individuals to build dwellings for investment is generally regulated credit; a company's business-purpose loan generally is not.

What does a development lender expect to see first?

Credit teams read the summary before the attachments, and many decide from it whether the deal is worth a full assessment. Put the whole deal on one page. Here is a template with an illustrative eight-townhouse project; every figure is an example.

Check the arithmetic before credit does: $5.55 million divided by $9.6 million is 57.8%; divided by $7.4 million it is 75.0%; and $7.4 million less $5.55 million is the $1.85 million equity line. A summary whose numbers do not reconcile with its own attachments costs you credibility for the rest of the deal.

How do you present the feasibility so it survives credit?

The feasibility is the deal. Present it with every line sourced: land from the contract, construction from the building contract and quantity surveyor, fees from quotes, contributions from the development approval conditions, finance costs from the lender's own term sheet, and gross realisation from the valuation or agent evidence. Show figures net of GST and say whether the margin scheme is used - the ATO's page on GST and property is the starting point, and the client's accountant should confirm the treatment.

Then stress it. In the illustrative deal, profit is $2.2 million: 29.7% on cost and 22.9% on gross realisation. Construction is $4.2 million of the cost.

Credit will run this table whether you do or not; running it first shows you understand the risk. The development feasibility calculator builds the same residual feasibility, including GST under the margin scheme, so you can test a client's numbers before you take the deal to a lender.

What should the QS report and builder information cover?

Most development lenders appoint a quantity surveyor (QS) to report to them. Your job is to give that QS what it needs on day one, and to flag anything the report is likely to question.

Construction cost risk is live. The ABS's producer price indexes recorded higher building construction output prices in the June 2026 quarter, so expect credit to look hard at whether a fixed-price contract is really fixed and whether the builder's balance sheet can absorb a squeeze. An ASIC company search through ASIC's registers on the builder and the borrower entity belongs in every pack.

How do pre-sales count towards a lender's requirement?

Pre-sales prove demand and set up the exit. Lenders usually measure pre-sale cover as qualifying pre-sales, net of GST, divided by the facility. In the illustrative deal, five sales at $1.2 million total $6.0 million against a $5.55 million facility: 108% cover. Requirements vary widely by lender, project size and location, and some lenders fund smaller projects with few or no pre-sales at a lower LVR.

Not every contract counts. Present each sale with the features credit will test:

• Arm's length: sales to the developer's family, staff or related entities are often excluded.
• Deposit: the amount, and whether it is cash or a deposit bond.
• Sunset date: a sunset date well beyond the build program lets a buyer walk away.
• Incentives: rebates, rental support deals or furniture packages reduce the effective price, and lenders net them off.
• Foreign buyers: whether foreign investment rules affect the purchase - see Treasury's foreign investment pages.
• Buyer finance: whether buyers are likely to settle with the lending available to them at completion.

A schedule listing each lot, buyer type, price, deposit, sunset date and incentive saves a round of credit questions.

How do you evidence the borrower's equity?

Equity is the lender's first-loss cushion, and credit wants to see it is real. In the example, the $1.85 million equity comes from land valued at $2.0 million as is, carrying $500,000 of existing debt ($1.5 million of land equity), plus $350,000 of cash.

• Cash: recent statements in the borrower's or guarantor's name, and the source - savings, a sale, a related-party loan.
• Land equity: an as-is valuation the lender can rely on, plus the payout figure for any existing debt.
• Deferred land payments or vendor finance: disclose them; they are debt, and they may need to be subordinated.
• Second-ranking capital: mezzanine debt or preferred equity filling part of the gap must be disclosed up front. Our guide to mezzanine and second mortgage finance covers how lenders view it.

Add a statement of assets and liabilities for each guarantor. A guarantor whose wealth is all in the project offers less support than the director's guarantee suggests.

Which valuation will the lender rely on, and what market evidence helps?

Lenders rely on valuations from their own panel, instructed by them. A valuation the client commissioned for another purpose is useful background but rarely the one credit relies on, so do not let it anchor the client's expectations. Expect an as-is value of the site and an as-if-complete value of the finished stock, usually with a realisation period and an assessment of the pre-sales.

Help the valuer and credit with market evidence: recent comparable sales, agent letters, the competing supply nearby. The ABS's monthly building approvals series gives a view of how many dwellings are coming through the pipeline. If the gross realisation in the feasibility sits above the valuer's figure, the facility will be sized on the valuer's number, so model that case before the valuation lands.

Is the deal regulated credit?

Decide this before you take the deal anywhere, because it changes your obligations. ASIC's FAQ on whether the credit legislation covers a loan says loans to companies are not subject to it, and only loans to natural persons and strata corporations are caught. It also says loans to natural persons wholly or predominantly to purchase, renovate or improve residential property for investment are regulated, and that a loan to buy land and build dwellings on it will generally be regulated, even if the borrower borrows several times to develop several properties. "Predominantly" means more than a 50% consumer component.

So a company borrowing to build eight townhouses for sale is generally outside the regime, while two individuals borrowing in their own names to build three units to hold as investments generally are not. If the deal is regulated, responsible lending applies, and a mortgage broker also carries the best interests duty in Part 3-5A of the National Credit Act, explained in ASIC's RG 273. Our overview of construction and development finance sets out the facility types either way.

Why do development deals stall at credit?

1. The feasibility does not reconcile with the QS cost plan or the building contract.
2. Development approval conditions or contributions are missing from the costs.
3. Pre-sales include related parties or long sunset dates, so cover falls short once they are excluded.
4. Equity is asserted, not evidenced, or depends on land value the valuer does not support.
5. The builder is thinly capitalised or overcommitted.
6. The borrower has no comparable track record and no experienced project manager.
7. Second-ranking debt or vendor finance appears late in the process.
8. The exit ignores unsold stock - our piece on residual stock loans for developers covers the fallback lenders like to see.

Most of these are fixed by asking the client the hard questions before you package the deal. A clean, reconciled pack is how you build a reputation with development credit teams, and it is how Finance Providers on ADS turn a borrower's loan request into a deal a lender will take seriously.

Frequently asked questions

What documents does a development finance submission need?

A one-page deal summary; the feasibility with sources; the building contract, plans and specifications; the development approval and conditions; the land contract and title search; a pre-sales schedule; evidence of equity; builder details and insurance; entity documents and guarantor statements of position; and an exit plan. Lenders will order their own valuation and usually their own QS report.

What margin on cost do development lenders want to see?

It varies by lender, project size and risk, and there is no single number. What every lender wants is a margin that survives stress: in the illustrative deal, a 29.7% margin on cost falls to 10.5% if prices fall 10% and construction runs 10% over. Show that table in the submission rather than waiting for credit to build it.

How much pre-sale cover do development lenders require?

Requirements vary widely. Some lenders want qualifying pre-sales to cover the facility, others accept less on smaller projects at a lower LVR. What counts is consistent: arm's-length buyers, real deposits, sunset dates that fit the program, and prices net of GST and incentives. In the example, $6.0 million of pre-sales covers a $5.55 million facility 108%.

Is a development loan to a company regulated under the National Credit Act?

Generally no - ASIC says loans to companies are not subject to the credit legislation. A loan to natural persons to buy land and build dwellings for investment generally is regulated, even across several properties. Confirm the borrower and the purpose at the start, because a regulated deal brings responsible lending and, for mortgage brokers, the best interests duty.

Should the broker order the valuation for a development deal?

Usually not. Development lenders rely on valuations from their own panel, instructed by them, so a valuation the client orders elsewhere is rarely the one credit uses. Supply the valuer with the feasibility, plans, pre-sales schedule and comparable sales, and model the facility at a lower value in case the valuation comes in below the client's figures.

Related reading

• Construction and Development Finance
• Residual Stock Loans for Developers
• Commercial and Asset Finance as a Second Revenue Line

Sources

• FAQs: Does the credit legislation apply? — Australian Securities and Investments Commission
• RG 273 Mortgage brokers: Best interests duty — Australian Securities and Investments Commission
• Producer Price Indexes, Australia (building construction output prices) — Australian Bureau of Statistics
• Building Approvals, Australia (monthly) — Australian Bureau of Statistics
• Search ASIC registers — Australian Securities and Investments Commission
• Foreign investment — The Treasury
• GST and property — Australian Taxation Office