Author: Ben Frietlander

Funding is one of the most important parts of any project. A strong site, capable builder, and well-priced product will go nowhere unless the necessary funding is put in place to complete the project.

For many developers, the question is not only how to fund a property development, but which type of lender is best suited to the transaction. Banks remain an important part of the market, particularly where a project has strong presales, conservative leverage, full documentation, and other qualities that put the transaction neatly within the bank remit. But not every property development fits that model.

That is where non-bank development finance can play an important role.

A non-bank lender may be the right fit where a project has strong fundamentals, but where the sponsor requires more flexibility around presales, leverage, timing, construction structure, or the way the construction loan is managed through the development lifecycle.

In this sense, these development loans can have commercially sound attributes in every respect and fit squarely in the non-bank space only due to certain funding preferences of a sponsor.

That does not mean the project is weak. It may simply mean the deal needs to be assessed on its full merits rather than against a narrow lending policy.

Identifying Whether a Project Fits the Non-Bank Lending Space

Common qualities of a non-bank development finance include:

Limited or no presales

Banks often require qualifying presales before funding a residential development. A non-bank lender may consider reduced or no presale cover where the location, price point, feasibility, borrower experience, and exit strategy support the loan.

No pre-sales does not always mean a client in unable to obtain pre-sales. For example, higher end product may dictate a different sales strategy – some developers see value selling a completed product, compared to selling off plan.

Higher leverage requirements

Developers may seek higher loan-to-cost or loan-to-value ratios than banks are prepared to offer. A non-bank lender can often provide greater leverage where there is sufficient equity, margin, and repayment certainty.

Equity requirements for non-bank can also differ. Many lenders will adopt the lower of purchase price or valuation. However there may be some scenario’s where it makes sense to adopt the intrinsic market value of a property. For example, a developer who has owned a site for some years, or is acquiring it below market value, may be bringing meaningful equity to the transaction. Land equity can be a key part of the funding structure and may reduce the cash contribution required.

It important to note that just because a developer is seeking a highly leverage solution, does not always mean that the developer does not have access to additional capital. However it does change the risk profile of the transaction or client portfolio. Debt is cheaper than equity, so a developer prioritising greater return will opt to inject less equity in the transaction to boost returns. Again, this is a strategic decision and not one taken out of necessity.

Timing pressure

Some projects need immediate funding -whether it’s settling a site, refinancing an existing lender, starting works quickly, or meeting contractual deadlines. Most non-bank lenders can move faster where the information is clear and the transaction makes sense. this is an area where non-banks can excel unburdened by red-tape and process.

No QS involvement & flexible funding arrangements

Quantity surveyor reporting is useful on many projects, but it is not always necessary or proportionate. Non-bank lenders can independently assess cost risk through other information, depending on the size and complexity of the project.

Furthermore, some projects do not fit neatly into a fixed-price contract model. Owner builders may have a preference to work to their own budgets or have cashflow obligations that sit outside traditional funding arrangements. A non-bank lender can take a practical view where cost control and delivery risk are still well managed.

On demand facilities are also possible for projects where there is inherent value in the land. These facilities would fall outside of traditional development facilities but instead are cashflow facilities that may independently support a development.

Each project needs commercial judgement

Some transactions require a lender to look beyond a checklist. This may include experienced developers with complex structures or staging, built in equity releases, pre-sale hurdles or milestones, or borrowers with a strong asset position but a deal that falls outside bank appetite.

The common theme is that the project still needs to be viable. Non-bank finance is not a substitute for a weak feasibility, unclear exit, or undercapitalised borrower. It works best where the project is fundamentally sound but needs a lender with flexibility, speed, and development finance experience.

Once it is clear a project fits the non-bank space, the next step is structuring the loan correctly.

Structuring the Development Loan

Property development funding is usually assessed across several core areas: equity, leverage, valuation, project costs, exit strategy, and delivery risk. A development loan takes all of these factors into account, but once a facility limit is approved, the structure typically comes down to two key components: the initial cash advance and the progress payment facility.

Initial cash advance

The initial cash advance is the portion of the loan drawn at the outset. This is commonly used for site purchase, refinancing an existing lender, or releasing equity from a property already owned. In this stage, equity can be injected through cash contributions, existing land value, or retained equity in the security property. The amount advanced will depend on the lending criteria against the property on as-is basis and a projects cost to complete.

Progress payment facility

The progress payment facility is the portion of the loan used to fund construction costs over time. This is almost always structured on a cost-to-complete basis, meaning funds are advanced progressively as work is completed and the remaining budget is confirmed as sufficient to finish the project.

Progress payments are usually made against verified works, supported by invoices, site inspections, quantity surveyor reports, or other evidence where required.

If there is an equity shortfall in the development budget, the developer will need to inject additional equity upfront before construction drawdowns commence. This ensures the project is in a fully funded cost-to-complete position before progress payments are released.

Balancing the progress payment facility and cash advance

These two components operate within a fixed facility limit. The total loan amount (facility limit) does not change, but how it is allocated between the initial advance and the progress facility can vary depending on the structure of the deal. A higher initial advance may reduce the available construction funding, meaning additional equity may need to be contributed toward the cost to complete, while a lower upfront draw may mean 100% percent of forward-looking project related costs can be funded.

For developers understanding how these two facilities interact is critical, as it can change how you inject your equity into the transaction which can be great tool for cashflow management.

The value of non bank finance

The value of non-bank development finance is not limited to approving deals that banks decline. The right non-bank lender can add value through speed, structure, experience, and active support.

A good non-bank lender understands that development projects are live transactions. Conditions change. Consents take time. Costs move. Sales campaigns evolve. Drawdowns need to be managed. Issues need to be addressed early and directly.

Lender experience matters

This is where lender pedigree matters. Developers and brokers should look closely at who they are dealing with. The cheapest rate is not always the best outcome if the lender is slow, unclear, inconsistent, or difficult to deal with once the project is underway. With over twenty years of experience providing construction loans in NZ, ASAP Finance has approved over $4.44 billion in facility limits across over 2,780 independent trasnactions.

When choosing a non-bank lender, consider:

• their experience in development and construction lending;
• whether they have funded similar projects before;
• how quickly they can make decisions;
• how clearly they communicate conditions;
• how drawdowns and progress payments are managed;
• whether they understand construction risk; and
• whether they have genuine client success stories.

Client success stories

Client success stories are important because they show how a lender performs in real transactions. They show whether the lender can help developers settle quickly, refinance under pressure, manage staged releases, work through project changes, or complete developments that needed a more tailored approach.

The right lender should bring more than capital. They should bring judgement, consistency, practical support, and experience.

Funding Your Development with ASAP Finance

At ASAP Finance, we work with developers across New Zealand to structure development and construction loans that reflect the realities of each project.

We assess each transaction on its own merits, including the borrower, site, feasibility, equity position, construction pathway, leverage, and exit strategy. For the right project, we can provide funding where bank lending may not be suitable, including transactions with no presales, higher leverage requirements, flexible construction structures (such as no QS or fixed price contracts), or time-sensitive settlement requirements.

If you are looking at how to fund your property development and want to understand whether non-bank finance is the right fit, contact the team at ASAP Finance to discuss your project.

Bridging finance can be a practical short-term funding solution when a borrower needs to manage a timing gap between two property transactions. For brokers, the key is knowing how to present the deal so a lender can quickly understand the transaction, assess the risk, and make an informed decision.

So, how do you get bridging finance in New Zealand?

In simple terms, you need three things: enough equity, a clear repayment strategy, and the right supporting information. If those elements are clear, bridging finance can often move quickly. If they are unclear, the deal can stall before it gets properly assessed.

In our previous blogs we explored simple concepts like; what is a bridging loan, and how much does a bridging loan cost. This guide takes the last step to explore what lenders look for in a bridging loan application, how brokers and borrowers can package the information properly, and how to identify issues early before time is wasted.

To get bridging finance, a borrower generally needs to show:

• what the loan is being used for
• which property or properties will secure the loan
• how much equity is available
• how the loan will be repaid
• how long the bridge is needed for
• what could delay repayment
• whether the exit is already contracted or still dependent on a future event

A lender will usually assess the transaction based on the strength of the security, the borrower’s equity position, and the credibility of the exit strategy. For a closed bridge, the process is usually more straightforward because the borrower already has a binding sale agreement in place. For an open bridge, the lender needs more comfort because the repayment event has not yet happened.

For brokers, the goal is to make the lender’s assessment easy. A strong bridging loan submission should tell the full story upfront and not leave the lender to piece it together from attachments.
Bridging finance is not assessed in the same way as a standard mortgage or long-term investment loan. The lender is not only asking whether the borrower has income. They are asking whether the bridge can be repaid within the proposed term.
Most bridging applications come down to five key factors.

1. Loan Purpose

The lender needs to understand why the bridge is needed.

Common purposes include:
• buying a new property before the existing one settles
• settling a time-sensitive purchase
• refinancing an existing short-term facility
• bridging residual development stock
• releasing equity from one property to fund another transaction
• managing a timing gap between project completion and final settlements

The purpose should be clear and commercially sensible. If the lender cannot understand why the borrower needs the money, the application becomes harder to support, although this is true for all credit applications.

2. Equity

Equity is one of the first things a lender will assess. It gives the lender a buffer if the exit takes longer than expected or property values shift.
Equity may come from:
• the property being sold
• the property being purchased
• both properties together
• completed development stock
• additional property security
• cash contribution from the borrower
A strong equity position does not automatically approve a deal, but it gives the lender more confidence. A tight equity position may still work for a closed bridge with a strong exit, but it is harder to support if the exit is uncertain.

3. Exit Strategy

The exit strategy is the most important part of a bridging loan.
The lender needs to know how the loan will be repaid. This may be through:
• settlement of an unconditional sale
• sale of an existing property
• sale of completed development stock
• refinance to a long-term lender
• settlement of pre-sales
• release of funds from another confirmed transaction
A bridge without a credible exit is not a bridge. It is just short-term debt with no clear repayment pathway.

4. Security and Debt Position

The lender needs to understand what property security is available and what existing debt is already in place.
In some cases, the loan may be secured against one property. In other cases, the lender may need security across two or more properties to create enough equity buffer.
For brokers, this should be explained clearly in the submission:
• What is the property?
• Who owns it?
• What is it worth?
• What debt is already secured against it?
• Is it being sold, purchased, retained or refinanced?
• What position will the bridging lender hold?
If the security position is unclear, the deal slows down.

5. Realistic Loan Term

A bridging loan must have a realistic term.
Borrowers often want the shortest possible term to reduce interest cost. That is understandable, but a term that is too short can create pressure later. Extensions can be more expensive and harder to arrange if the borrower waits until the last minute.
Brokers should consider whether the loan term requested by the client is realistic before submitting the application. If a sale is the exit, is the property already under contract? If not, is it listed? Is the price realistic? If refinance is the exit, has a long-term lender assessed the borrower? If the exit depends on a development milestone, what still needs to happen?
Bridging finance is useful when the funding need is short-term, the security is clear, and the exit is realistic. The following examples show how this can apply in practice.

Case Studies

Closed Bridge – Purchase of a New Property

A borrower has found a new home and needs to settle in 30 days. Their existing home is already under contract, with settlement due 45 days later.
In this case, the bridging loan covers the timing gap between the purchase settlement and the sale settlement. The lender can assess the transaction quickly because the exit is known, the sale agreement is in place, and the repayment date is clear.
What are the key information requirements?

• sale and purchase agreement (ASP or S&P) for the new property
• sale and purchase agreement for the existing property
• current loan balance and historical loan statements
• expected net sale proceeds
• requested loan amount
• proposed settlement dates
• confirmation of security being offered

This is a typical closed bridge. The key risk is settlement timing, so the broker should make sure the loan term allows enough buffer.

Open Bridge — Investment Property Acquisition

An investor owns an unencumbered investment property and wants to purchase another property quickly. They intend to refinance with a bank once the purchase settles, but the bank process will not be completed in time.
A bridging loan may allow the investor to complete the purchase and then refinance into longer-term debt later.
What the lender will focus on:
• value of the security property
• purchase price of the new property
• borrower’s overall debt position
• likely refinance pathway
• timeframe required
• evidence that long-term refinance is realistic

This is not just about the asset value. The lender still needs to understand how the bridging loan will be repaid. If the refinance exit is not credible, the deal becomes weaker.

Open Bridge — Property Development Cash Flow Facility

A property developer has completed a six-unit townhouse project. Three units have settled, and three remain unsold. The developer wants to repay an existing development facility and release some equity to secure the next site.
A bridging loan may allow the developer to refinance the development loan facility and release enough equity to support the acquisition of the next development site.

What the broker should provide:

• sales schedule outlining security and expected sale price
• confirmation of title and CCC
• current loan balance and historical loan statements
• evidence of market demand, such as previous sales data or CMA reports from agents
• residual debt position after sale of the three townhouses
• sale and purchase agreement for the project being acquired
  details of the next project.

If the sale proceeds are not sufficient to clear the debt in full, expect your lender to test the viability of the project based on the residual balance of the bridging loan.

This is a development-related bridge. It should not be presented as a simple property refinance. The lender needs to understand the current security position, saleability of the units, timing and repayment pathway.

Closed Bridge — Pathway to Titles and Code of Compliance

A townhouse project is nearly complete. The client has lodged for 224(c), which is being processed. Similarly, Final Inspection Pass has been achieved; however, CCC is yet to issue.
The project is pre-sold and settlements are due once the pre-sale agreements fall unconditional, which will occur on issuance of titles and code of compliance. The existing lender’s facility is maturing, but the final settlements are still a few months away.
While not a bridging loan in the traditional sense, a facility of this nature bridges the compliance gap many property developers face at the back end of a project. A refinance of the existing debt may reduce a developer’s holding cost as they work their way toward titles, code and, eventually, settlement of the pre-sales.

What the lender will want to understand:

• current project status
• project cost-to-complete, including whether any works or costs remain outstanding, or processing costs such as CCC uplift fees or development contributions
• compliance certificates, including evidence of Certificate of Acceptance (COA) for public infrastructure and Engineering Approval Completion Certificate (EACC)
• CCC status. The CCC lodgement pack is often the best source of information here, as it includes inspections plus supporting documentation such as producer statements, records of work and other sign-offs
• title issue timing
• pre-sale contracts
• settlement dates
• purchaser conditions
• loan balance and historical loan statements

This type of bridge can be a good fit where the exit is clear but timing has moved. However, the submission needs to show that repayment is genuinely pending, not speculative.

Common Roadblocks and Hurdles

Some bridging enquiries may not be ready to submit. Others are unlikely to be fundable without a major restructure. Brokers can save time by identifying common transaction attributes that may prevent a transaction from being funded.

1. If the borrower cannot explain exactly how the loan will be repaid, the deal is unlikely to progress. “We will sell the property” is not enough. The lender needs to understand the likely sale price, expected timeframe, current marketing position and what happens if the sale takes longer than expected.
2. If existing debt is too high at the initial refinance stage, there may not be enough security to provide for an additional equity release to enable the bridge. This is especially true for open bridge loans, where the repayment outcome is less certain and longer terms may be required.
3. A borrower may believe their property is worth more than the market supports. If the bridging loan only works at an optimistic sale price, the lender will be cautious. Brokers should test value assumptions before submission. Comparable sales, agent appraisals, recent offers and valuation evidence can all help.
4. If ownership is unclear, existing debt is not disclosed, or there are caveats, second mortgages or unresolved legal issues, the deal can slow down quickly. These matters should be disclosed early. Lenders do not like surprises late in the process.
5. Unrealistic terms: a short term may reduce projected interest cost, but it can create problems if the exit takes longer. If the borrower realistically needs six months, do not package the deal as a three-month bridge just to make the numbers look better.
6. If repayment depends on CCC, titles, pre-sale settlements, residual stock sales or a project refinance, say so upfront. Development-related bridging can be fundable, but the risks need to be presented clearly.

A strong broker submission reduces ambiguity. It helps the lender understand the deal quickly and focus on the actual credit decision.

Securing your bridging in loan

A practical structure to present a lending proposal is as follows:

1. Transaction summary
2. Borrower/sponsor background
3. Loan request
4. Security position
5. Equity position
6. Exit strategy
7. Timing and urgency
8. Key risks and mitigants

ASAP Finance assesses bridging finance through a practical property and credit lens. For development-related bridging, we also consider where the project sits in its lifecycle. A completed project waiting on settlements is different from a partially complete project with remaining construction risk. Understanding that difference is critical to structuring the right facility.

As a non-bank lender, ASAP Finance can often move quickly where the transaction is well-packaged and the exit strategy is clear. The more complete and commercially clear the submission, the faster the credit conversation can move.
If you have a bridging finance scenario that needs a quick, practical assessment, get in touch with the team at ASAP Finance.

In our previous blog, we explained what a bridging loan is and when it can make sense. This article takes the next step: what bridging finance costs, what drives that cost, and how developers can assess whether the benefit outweighs the expense.

For developers and investors, the cheapest facility is not always the best facility. A bridge that allows you to settle the next site, avoid a forced sale, release equity from residual stock, or keep a project programme moving can create value. The key is understanding the full cost before you commit.

What Does Bridging Finance Cost?

The cost of bridging finance usually includes interest, establishment fees, legal costs, and any additional costs required to document, secure, or extend the facility. Interest is generally the largest component, but fees and timing can materially change the total amount repaid.

At a high level, the cost depends on five practical factors: how much is borrowed, how long the bridge runs, whether interest is capitalised or serviced monthly, the strength of the security position, and how certain the exit strategy is. A closed bridge with a contracted sale will usually be easier to price and assess than an open bridge where the exit still depends on a future sale.

ASAP Finance offers term-specific pricing, so shorter loans can attract lower interest rates than longer-term facilities. That does not mean every borrower should choose the shortest possible term. It means the term should be realistic. A facility that is too short can become expensive if it needs to be extended under pressure.

The Main Cost Components

Interest

Interest reflects the short-term nature of the facility and the risk profile of the transaction. In bridging, interest is often capitalised, meaning it accrues during the term and is repaid when the exit occurs. This is useful where cashflow is tight, but it also means the total cost increases the longer the facility remains outstanding.

Establishment and legal fees

Establishment fees and legal costs are typically confirmed upfront. These should be included in the borrower’s cost assessment from day one, rather than treated as an afterthought. For developers, the full cost of capital should also be reflected in the project feasibility so the net margin remains accurate.

Valuation, due diligence and security costs

Depending on the transaction, there may be valuation, title, security, or solicitor costs. These costs vary from lender to lender, for example at ASAP Finance, we provide bridging loans without registered valuations. In a development funding scenario, the lender may also need to understand existing debt, security over one or more properties, GST position, current sale status, and any other matters that affect the exit.

Extension and rollover costs

Extensions are where bridging finance can become expensive. If a sale is delayed, a purchaser defaults, or settlement takes longer than expected, the bridge may need to run beyond the original term. This can result in additional interest and fees. A sensible buffer is often cheaper than a rushed extension.

Capitalised Interest vs Interest-Only: Which Costs Less?

Capitalised interest and interest-only repayment structures solve different problems.

Capitalised interest is common because bridging finance is often used at a point where cashflow is constrained (as is the case for most developers). The borrower does not make monthly interest payments. Instead, interest is added during the term and repaid when the bridge is cleared. This can preserve cashflow during a tight settlement period or while residual development stock is being sold.

Interest-only can reduce the total interest bill because the borrower services interest monthly rather than allowing it to accrue. However, it only works where the borrower has cashflow to meet those payments. For many developers, cashflow is better preserved for project costs, settlements, council sign-offs, marketing, or holding costs.

The right structure depends on the borrower’s position. A developer holding completed townhouses may prefer capitalised interest so they can keep liquidity available while sales settle. An investor with strong rental income may choose interest-only to reduce the overall cost.

How Much Can You Borrow on a Bridge Loan?

The amount available depends on the security, the available equity, the current debt position, and the proposed exit. In some cases, lending may be secured against the property being sold, the property being purchased, or both. This can give borrowers more flexibility than a standard single-security loan.

ASAP Finance can consider loan facilities up to $50 million on a single transaction. The stronger question is not simply how much can be borrowed. It is how much should be borrowed while still leaving enough equity and time to complete the exit without unnecessary pressure.

For developers, this matters because bridging is often used to recycle capital. A completed project may have residual stock with value created, but that value is not cash until sales or refinance settle. A bridging facility can unlock part of that equity, but the loan amount should still be sized against realistic sale values, GST, selling costs, and the expected sell-down timeframe.

Of note, interest only bridging loans results in a larger cash advance to the borrower. This is because capitalised interest is deducted from borrowers’ facility limit. Expect your lender to stress test your income, ask more questions about servicing, or even reduce lending when seeking an interest only bridging loan.

Example 1: Residential Purchase Before Sale Settlement

A borrower needs to settle a $1.2 million purchase before the sale of their existing property completes. They arrange an $800,000 closed bridge for three months, with capitalised interest.

If the existing sale settles on time, the cost is contained to the agreed term, interest, establishment fee and legal costs. The exit is clear and the borrower avoids missing the new purchase.

If settlement is delayed by two months, the bridge runs for five months. The additional term increases the total interest cost and may require an extension. This does not necessarily make the bridge a poor decision, but it shows why the expected repayment date should be tested before the facility is documented.

Keep in mind that facility limits provided by lenders are just that – limits. Increasing a facility limit may require you to inject additional equity into the transaction to cover additional interest and fees.

Example 2: Developer Bridging Residual Stock to Secure the Next Site

A developer completes a six-townhouse project. Four units have settled, two remain unsold, and the developer has an opportunity to secure the next site. Waiting for the final two units to sell could mean losing the site. Accepting a heavily discounted offer could damage the project return.

A bridging facility secured against the residual stock may allow the developer to recycle capital into the next project while maintaining a measured sales strategy. The cost of the bridge should be compared against the opportunity cost: lost site, extra holding costs, or discounting stock too heavily to force a quick sale.

This is where bridging finance should be assessed commercially, not just by headline rate. The real question is whether the cost of funds protects or improves the overall development outcome.

How to Keep Bridging Costs Under Control

Start with a realistic term

Borrow for a realistic period – then add some buffer. If you expect settlement or sell-down to reasonably take four months, then a six-month loan will likely be the best solution for you. A three-month bridge may look cheaper on paper but could end up costing you in additional extension fees if you are unable to exit the loan in time.

Know your true holding cost

Developers should understand the monthly cost of holding stock, including interest, rates, insurance, body corporate costs where relevant, sales costs and opportunity cost of trapped equity. This helps decide whether to wait, discount, refinance, or bridge.

Size the loan carefully

Only borrow what is needed. A larger facility may feel comfortable, but unused or unnecessary debt can increase total cost. The loan should be structured around the actual cashflow gap, not the maximum available security.

Prepare the exit evidence early

A stronger exit can improve confidence and reduce friction. For a closed bridge, this may be an unconditional sale and purchase agreement. For an open bridge, it may include a realistic sales strategy, market evidence, agent appraisal, valuation, or refinance pathway.

Build the finance cost into the feasibility

For development projects, bridging costs should sit inside the feasibility and be measured against net margin after finance costs. A project that looks sound before interest and fees may be much tighter once the full cost of capital is included. Keep in mind finance costs are no different to any other project related costs such as civils or construction.

Is the Cost of Bridging Finance Worth It?

Bridging finance is not designed to be the cheapest form of debt. It is designed to solve a timing problem. Whether it is worth it depends on the quality of the opportunity, the certainty of the exit, the borrower’s equity position, and the cost of not acting. If you have a higher and better use for capital, i.e. that the money used from the loan generates a return far greater than your cost of capital (within your risk parameters), then it will likely be worth it.

For developers, a well-structured bridge can support growth by turning completed or near-completed value into working capital for the next opportunity. Used poorly, it can increase pressure and erode margin. The difference is structure.

Explore Bridging Finance Costs with ASAP Finance

ASAP Finance provides tailored bridging loans for developers, investors and property borrowers across New Zealand. If you are assessing the cost of a bridge, the next step is to test the numbers against your security, term, exit and wider development strategy.

For more on bridging loan, read How to Get Bridging Finance in NZ, which explains the documents, equity position and exit evidence lenders typically review.

A bridging loan is short-term property finance used to cover a timing gap between a current funding need and a future capital event, such as a property sale, refinance or project sell-down.

Bridging loans, put simply, look to bridge a gap between your capital commitments or obligations and expected capital inflows. These scenarios can arise for a multitude of reasons; however, the most common is the timing gap between selling an existing property and settling on a new property that you are acquiring. In this sense, a bridging loan exists to solve a specific problem: cashflow. And in the world of property, accessing capital at the right time can be the difference between securing an opportunity and losing it.

Let’s examine when a bridging loan is a good idea, when it isn’t, and how to decide.

Bridge Loans Recap

A bridging loan is a short-term loan secured against property. It is designed to cover a temporary funding gap, typically while waiting for the proceeds from the sale of an existing asset to become available.

Unlike a standard mortgage, bridging loans are not structured around long-term repayment schedules. They are intended to be repaid quickly, commonly within three to six months, with some facilities structured for longer where justified.

Interest is usually capitalised rather than serviced during the loan term, meaning it accrues and is repaid at the end, along with the principal. This makes bridging finance well-suited to situations where cashflow is constrained during the bridging period.

When Does Bridge Finance Make Sense?

Bridging finance is built for timing gaps and works best where the borrower has a clear and credible exit strategy to repay the debt. In New Zealand, one of the most common scenarios where bridge loans are used is settling on a new property purchase before the sale of an existing property has been completed. Rather than losing the opportunity to make the purchase or selling your existing property under pressure to realise capital, a bridging loan allows the transaction to proceed.

For property developers, bridging finance can be an exceptionally useful tool where capital is tied up in residual stock from a completed or near-completed project. A developer may have created value and built profit into the project, but until the remaining stock is sold or refinanced, that equity is not fully available. Bridging finance can help unlock part of that value and allow the developer to secure the next site or opportunity without waiting for the full sell-down to complete.

This is where bridging finance can support growth. Rather than treating each project as entirely separate, a well-structured bridge can help developers recycle capital from one project into the next. The key is that the lender must be comfortable with the remaining stock, the expected sale timeframe, the borrower’s pricing expectations and the overall exit strategy.

Investors looking to scale their portfolio face a similar dynamic. If the right opportunity appears before existing capital has been freed up, bridging finance can allow them to act without waiting on a sale to settle.

The common denominator between these scenarios is a well-defined exit strategy. The more certain and well-defined the exit strategy is, the more viable the bridging loan becomes.

Open vs Closed Bridging: The Difference in Risk

Not all bridge loans carry the same level of risk, and understanding the difference is an important part of deciding whether bridging finance is a good option for you.

A closed bridge loan is one where a clear exit strategy is already in place. The most common example is where a borrower has an unconditional sale and purchase agreement on their existing property, but the settlement date falls after the date they need to settle on their new purchase. This scenario is called a closed bridge. The binding unconditional sale and purchase agreement sets a defined repayment date for the bridging facility to be repaid.

From the lender’s point of view, closed bridges are lower risk due to the clear path to repayment.

However, even during a closed bridge, there are a variety of considerations for the lender. These include the strength of the purchaser, the purchasing entity, whether an individual or limited liability company, and other general terms of the contract. This includes the price paid, deposit, if any, GST position and other general terms that may weaken or strengthen the weight of the contract.

On the other hand, open bridge finance requires a more careful approach. Here, no binding sale and purchase agreement exists at the time of borrowing. The borrower needs to settle on a new property but has not yet secured a buyer for their existing one. There is no fixed repayment date and no guaranteed income to draw on. This makes an open bridge riskier for both the borrower and the lender, and it requires a more thorough assessment of whether the exit is realistic.

Open bridging still serves as a valid strategy when it is properly structured. In many property scenarios, waiting until an asset is sold can mean missing the next opportunity. The key issue is not whether the bridge is open or closed; it is whether the lender can get comfortable with the security position, sales strategy, market conditions, borrower behaviour and realistic exit timeframe.

Lenders will need to be convinced about your exit strategy, including your sale methodology and timelines. They will need to see value in your product, believe the market will similarly see value at the same level, and see that you are a willing seller with realistic expectations as to market price. A disconnect between vendor sale price expectations and the realities of the market can result in poor client outcomes, as speed is everything in the world of bridging finance.

ASAP Finance provides both open and closed bridging solutions, structured to suit the specific circumstances of each borrower. Closed bridging is generally lower risk because the exit is already contracted. Open bridging carries more uncertainty because the exit has not yet occurred, but it can still be a valid and effective strategy where the security position is strong, the sale strategy is realistic, and the borrower has a clear plan to repay the facility.

Key considerations of Bridging Finance

Bridging finance is a useful tool, but it is not without downsides. Before committing to a bridge loan, it is worth understanding where the risks sit.

Cost

Interest and fees associated with bridging loans are often higher than standard lending, reflecting the short-term nature of the facility and the risk profile involved. Because interest is typically capitalised rather than serviced, it accrues throughout the loan term and is repaid at the end of the loan. If the term extends beyond what was originally anticipated, there will be additional interest and fees, which can compound, and the total cost of bridging finance increases.

Exit dependency

A bridge loan is only as reliable as the exit behind it. If the sale of an existing property takes longer than expected, achieves a lower price than anticipated, or falls through entirely, the borrower can find themselves in a difficult position. This is particularly true of open bridge scenarios, where the exit is not yet secured at the time of borrowing.

Timeline pressure

Bridge loans are short-term by design, typically running between three and six months, or sometimes up to twelve months where appropriate. Borrowers who underestimate how long their exit will take, whether due to a slow market, settlement delays, or other unforeseen circumstances, may find themselves needing to extend the facility, which carries additional cost and is not always straightforward to arrange.

How to Reduce Risk in Bridging Finance

Exit clarity

Before taking on a bridge loan, borrowers should have a realistic and well-considered plan for how and when the facility will be repaid. The stronger and more certain the exit, the more manageable the bridging period becomes. Where possible, having a binding sale and purchase agreement in place before drawing down a bridge loan significantly reduces the uncertainty involved. In other words, opt for a closed bridge where possible.

Realistic timelines

ASAP Finance recommends a minimum loan term of three months, even where borrowers expect to need less time, to allow for unforeseen delays in settling the sale of an existing property. Adding a buffer to your expected repayment timeline will ultimately be less costly than extending the facility under pressure (the same can be true when seeking development and construction funding).

Understand the opportunity cost

One decision we commonly see developers struggle with is whether to accept an offer at a price that is below the forecast or expected sale price. To make this decision, you need to know your product, understand the depth of the market you’re playing in, and know your holding cost. If you’ve marketed your property for three months without any offers, and you receive an offer $30,000 below your asking price, but your holding costs are $30,000 per month, then you need to recognise that if, in one month’s time, you still have no offers, you’ll be $30,000 worse off, with no sale and high holding costs. It is a complicated dynamic, but understanding your sale price and your bottom-line price, and having a strategy in place to execute, are paramount.

Lender experience

Working with a lender who understands the specific dynamics of bridging finance makes a material difference. At ASAP Finance, our lending managers are experienced investors and developers themselves. We assess bridging applications with a practical understanding of how property transactions work, and we structure facilities to suit each borrower’s real timeline and circumstances.

Make an Informed Decision on Bridge Loans with ASAP Finance

Bridging finance is one of many tools available to property developers and can help developers grow and scale their business. But like any tool, it’s only useful if you know how to use it. It’s essential that borrowers have a clear understanding of how to get bridging finance and a critical view of the risks involved. That preparation, combined with a lender who understands the nuances of short-term property finance, gives any bridging facility the best chance of success.

If you are considering bridging finance and want to understand how it could work for your situation, get in touch! To get the ball rolling, all we require is the property details, sale and purchase agreement, funding requirement and details of your exit strategy. The team at ASAP Finance can quickly assess whether bridging finance is suitable and help you evaluate the right structure for your circumstances.

Property development finance has a lot of moving parts. From feasibility and equity contribution to LVR, cost-to-complete, construction risk, QS involvement, pre-sales and exit strategy, each element plays a part in whether a project is fundable.

At ASAP Finance, we have covered many of these topics in detail across our development finance blog library. This article brings those core concepts together in one place, giving developers, brokers and advisers a practical summary of the key issues to understand before seeking funding.

Use this page as a starting point. It highlights the main lending considerations that shape a development finance application and links through to deeper articles where each topic is explained in more detail. For a more complete, end-to-end breakdown of the funding process, including lender types, build contracts, feasibility, risk management and ASAP Finance’s process, download our full development finance guide.

How Development Finance Works: The Basics

Development finance is short-term funding used to help acquire, build and complete a property development project. It may cover land, civil works, vertical construction, professional fees, council costs, finance costs and other approved project costs. Rather than being assessed purely against an existing property value, the facility is structured around the project lifecycle and the funding required to reach completion.

The key point is that lenders assess the full development picture: projected sales, total development cost, GST treatment, programme, developer experience, construction methodology, peak debt and repayment strategy. Drawdowns should remain aligned to cost-to-complete, so the remaining facility and remaining borrower equity are sufficient to finish the project. For more detail, read our guide on how property development finance works.

The Main Risks Developers Need to Manage

Every development carries risk. Build costs can move, consent and title timeframes can stretch, site conditions can create cost blowouts, builders can underperform and buyer demand can shift before completion. These risks do not make a project unworkable, but they need to be identified early and reflected in the feasibility, programme and funding structure.

Experienced developers manage risk by building appropriate contingency into their budgets, stress-testing revenue and cost assumptions, confirming site constraints early and surrounding themselves with the right delivery team. The funding structure also matters. A project with the wrong debt profile, inadequate contingency or weak repayment strategy can run into pressure quickly. Read our guide to property development risks and how to mitigate them, for a deeper breakdown.

Due Diligence: Where Strong Projects Start

Due diligence is where a developer tests whether a site is commercially viable, fundable and deliverable. This means checking more than the purchase price. Zoning, density, access, services, geotechnical conditions, flood or overland-flow risk, stormwater, consenting pathway, construction constraints and end-sale evidence all influence whether the numbers stack up.

Good due diligence also improves the funding conversation. Lenders take more confidence from applications where the developer can explain the site, budget, programme, exit and risk mitigants clearly. For a more detailed review of what to investigate before acquiring a site, read our property development due diligence blog.

LVR, LTC and Peak Debt: The Numbers Lenders Watch

Loan-to-value ratio, or LVR, measures the loan against the value of the security. In development finance it is important, but it is not the only metric that matters. Lenders also consider loan-to-cost (LTC), peak debt, net margin, contingency, pre-sale cover where relevant, and the borrower’s equity contribution. A project can look acceptable on one metric but still need restructuring once the full funding requirement is assessed.

For development projects, lenders may consider the as-is land value, the completed value or gross realisable value, and the total cost required to complete the development. Getting the LVR, LTC and peak debt position right early can be the difference between a fundable deal and one that needs to be restructured. You can read more about this topic in our loan-to-value ratios blog.

Banks and Non-Bank Lenders: Different Risk Appetites

Banks can be a strong option for low-risk projects that fit policy, particularly where the developer has strong equity, pre-sales, a fixed-price contract and the time to work through a more detailed approval process. Non-bank lenders can be more flexible where a project is viable but does not fit a bank’s criteria, or where speed, gearing, pre-sales, build structure or drawdown flexibility are important.

The practical difference is risk appetite and structure. Non-bank lenders still assess the fundamentals carefully, but they can often take a more commercial view of feasibility, equity already contributed, product-market fit, delivery capability, repayment strategy and conditions required for funding. To understand when a non-bank approach may suit your project, read our guides to the benefits of non-bank lenders.

Quantity Surveyors and Cost-to-Complete Control

A quantity surveyor provides independent cost oversight on a construction project. In development finance, a QS may review the budget, assess the build contract, identify exclusions, and certify progress claims before funds are released. The objective is to confirm that the remaining budget and undrawn funding are enough to complete the project.

QS involvement can add discipline and reduce cost risk, especially on larger or more complex projects. It can also add time and cost, so it should be considered in context. At ASAP Finance, external QS involvement may be waived where the project, borrower experience, equity position and cost-to-complete analysis support that approach. To explore how the QS process works and what it means for your funding, read our guide to the role of a quantity surveyor in development finance.

Key Development Finance Terms to Understand

Development finance comes with its own language. Understanding terms such as equity contribution, GRV, LVR, LTC, pre-sales, cost-to-complete, capitalised interest, progress drawdowns, sunset dates and exit strategy helps developers have better conversations with lenders and advisers.

Our property development FAQs and glossary bring together common questions from New Zealand developers and plain-English definitions of the terms used throughout the funding process. Use it as a companion resource to the broader guide.

Talk to ASAP Finance About Your Development Funding Structure

The key message from the guide is simple: development funding needs to fit the project. The right structure depends on the site, feasibility, programme, borrower equity, delivery team, risk profile and repayment strategy.

At ASAP Finance, we work with developers across New Zealand to structure development and construction loans that reflect the realities of each project. If you are planning a development and want to understand which parts of the guide apply to your specific situation, get in touch with our team to discuss your plans.

Property development and construction projects involve significant financial commitments from a range of stakeholders. Accurate cost management is essential to keeping a project on track and financially viable. One of the key professionals involved in managing these costs is the quantity surveyor.

Lenders often require independent quantity surveyor reports to help monitor project budgets, verify construction progress, and identify potential financial risks before further funding is released.
For developers, quantity surveyors can also play a practical role in keeping projects moving efficiently. By providing clear cost oversight and early identification of potential overruns, they help reduce delays and maintain confidence between developers and lenders.

At ASAP Finance, this process is approached differently. We do not always require an external quantity surveyor because our lending managers work closely with developers to understand project costs upfront and monitor progress throughout the build.

What Is a Quantity Surveyor?

A quantity surveyor, often referred to as a QS, is responsible for managing and monitoring the costs of a construction project. Their role helps ensure that projects remain financially controlled from the early feasibility stage through to completion.
Quantity surveyors typically assist with preparing cost estimates, reviewing construction budgets, and monitoring expenses throughout the build. They may be engaged directly by the client, but in many development finance scenarios the lender appoints a QS from its own panel to provide an independent assessment.

They also work with developers, builders, and lenders to ensure that construction costs align with the approved project budget, review each progress claim, and confirm the project remains in a full cost-to-complete position after funds are released.
In development projects, quantity surveyors play an important role in helping developers understand the true cost of construction before committing to a project. This can include material and labour cost estimates, professional fees, contingency allowances, and potential budget-related risks.

How Much Does a Quantity Surveyor Cost?

The cost of a quantity surveyor can vary depending on the size, complexity, and reporting requirements of the project. For small residential builds, QS services may cost several thousand dollars. However, for medium to large-scale developments, QS costs can quickly escalate. The scale of the development is not the only factor that affects pricing. The frequency of reports required, the complexity of the build, and the level of detail expected by the lender can also influence the overall cost.
While QS reports can provide useful cost oversight, they can also represent a significant additional expense for developers. In many cases, this cost is driven by lender requirements rather than the developer’s own preference.
For developers, avoiding an external QS requirement can be a major advantage. It can reduce upfront costs, simplify the funding process, and remove an additional layer of third-party review, provided the lender has the experience and internal processes to assess costs and monitor progress effectively.

What Quantity Surveyor Reports Typically Include

Quantity surveyor reporting usually falls into three key categories: an initial report, a pre-condition or pre-lending report, and ongoing monthly drawdown reports.
The initial report is generally used to assess the project budget, construction contract, contingency allowance, and overall cost assumptions. A pre-condition or pre-lending report may then be required by the lender before funding is advanced, giving the lender independent confirmation that the project costs are realistic and that the proposed facility is appropriately structured.

Once construction is underway, ongoing monthly drawdown reports are often used to assess progress claims. These reports help confirm that completed works align with the amount being requested and that the project remains in a full cost-to-complete position after funds are released.

Lenders use these reports to verify that project budgets are realistic and that funds are being used appropriately as construction progresses.

• The exact format will vary between QS firms, lenders, and project types, but QS reporting will typically cover:• Detailed project budget: Assesses construction costs, professional fees, contingencies, and other project-related expenses.
• Programme review: Reviews the proposed construction programme, key milestones, and expected timing of works.
• Contractor experience: Considers the builder’s experience, track record, and previous working relationship with the developer where relevant.
• Construction contract review: Verifies the agreed contract price, scope of work, and payment structure between the builder and developer.
• Consents and approvals: Reviews the status of required consents, permits, and approvals needed for the project to proceed.
• Insurance review: Checks that appropriate project and contractor insurances are in place before and during construction.
• Cost-to-complete analysis: Estimates how much further funding is required to finish the project based on the work completed so far.
• Contingency review: Evaluates whether the contingency allowance is sufficient to manage potential cost overruns.
• Progress assessment: Confirms whether construction milestones claimed by the builder have been completed to the required standard.
• Drawdown recommendation: Advises the lender whether the next stage of funding should be released and how much should be advanced.

Why Some Lenders Use Quantity Surveyor Reports

Lenders often require quantity surveyor reports because they provide an independent layer of oversight between the borrower, builder, and lender. Rather than relying solely on information provided by the borrower or project team, the lender can use an external QS to gain additional confidence that the project is progressing in line with the approved funding structure.
This independent oversight helps lenders manage risk throughout the construction period. Property developments can change quickly, and issues such as cost increases, delays, variations, or funding shortfalls may emerge after the loan has been approved. A QS can help identify these risks early, giving the lender greater visibility before further funds are released.
For lenders, the value of a QS report is not just the technical detail. It is the comfort that comes from having an experienced third party review the project objectively, highlight potential concerns, and support responsible funding decisions as the build progresses.

Why ASAP Finance Does Not Always Require a Quantity Surveyor

When working with the right non-bank lender, an external quantity surveyor is not always required. At ASAP Finance, we take a hands-on approach to understanding project costs from the outset, so funding can be structured around a clear and practical view of the development.

Before funding is approved, our team conducts a detailed 360-degree review of the project. This includes reviewing the project budget and feasibility, relevant consents and approved plans, construction programme, project insurances, builder experience, consultant team, construction methodology, scope of works, contractor pricing, contingency allowances, funding requirements, and other key matters a QS would usually consider. This early work is designed to address many of the same questions that would typically be covered in an initial QS or pre-lending report.
Our process helps identify potential gaps, pressure points, or cost risks before the project moves into construction. Rather than relying on a QS report after the fact, ASAP Finance works with clients to ensure critical risks are identified, and where possible dealt with, before the project commences.

Once the development loan facility is approved, we create a simple drawdown schedule for the client to follow. This schedule is based on construction milestones and sets out when progress payments are expected to be made throughout the project.
This milestone-based approach is especially useful because many ASAP Finance clients are owner-builders or project managers, meaning there may not always be a fixed-price construction contract in place. In these cases, a practical milestone schedule can provide a clearer and more workable framework for funding the project than relying on a traditional QS-led process that may be unnecessary.
ASAP Finance’s lending managers then monitor the project as it progresses. This includes reviewing each progress claim, checking the project remains in a full cost-to-complete position after funds are released, reviewing council inspections, assessing progress against the milestone schedule, completing site visits, reviewing photos, and processing progress payments once the relevant stage has been reached.
This approach allows us to maintain strong oversight of the project without automatically requiring a third-party quantity surveyor on every development.

Benefits of Not Requiring an External QS in Every Case

Requiring an external QS can add cost, administration, and delay to a project. For many property developers, this can create additional friction at the exact point where project momentum matters most. ASAP Finance’s approach to development funding can help reduce unnecessary third-party costs and make the drawdown process easier for clients to followa and can be applied to projects of all shapes and sizes, from apartment blocks to 39 terrace townhouses.

Instead of adding another layer of external reporting in every case, funding can be tied to a clear schedule of agreed construction milestones. This gives developers more certainty from the outset and helps keep the process practical, transparent, and easier to manage.

Another major benefit is improved cash flow. Progress payments do not always need to be restricted to a monthly QS reporting cycle. Depending on the project, drawdowns can be structured fortnightly or around agreed construction milestones, helping developers receive funds more promptly, keep contractors paid, and ensure the site remains properly resourced. We also endeavour to process all progress claims within 48 hours, with most paid on the same day a claim is made.
The result is a practical development finance process that supports responsible lending while helping projects continue moving toward completion. For developers, the ability to avoid unnecessary external QS costs can be a significant benefit, particularly on larger projects where QS fees can become substantial.

A More Practical Approach to Development Finance

Quantity surveyor reports can play a useful role in development finance, particularly where a lender needs independent cost verification. But they are not always necessary on every project, and they can add significant cost, time, and friction for developers.

ASAP Finance takes a more practical approach. By bedding down costings early, agreeing a clear milestone-based drawdown schedule, and maintaining direct oversight during the build, we can often remove the need for an external QS while still keeping the project properly monitored.

For developers, this can be a major advantage. It means fewer third-party costs, a simpler and potentially faster progress payment process, improved cash flow, and less friction between the lender, builder, and client. Prompt milestone-based payments can also help keep contractors engaged and ensure the site remains properly resourced throughout the build.

If you are planning a development or want to understand whether your project could be funded without an external QS requirement, get in touch with ASAP Finance to discuss a structure that works for your project.

Property development can be a highly effective way to create value in the New Zealand property market, but it also raises many questions for both new and experienced developers. From understanding equity requirements to navigating construction funding structures, the process involves a number of financial and strategic considerations.

Our property development FAQ and glossary blog, we address some of the most common questions developers ask when planning a project. By understanding development finance, the risks involved, and what lenders typically expect, developers can approach their projects with greater confidence and clarity.

How Much Equity Do I Need for Property Development?

Most property development projects require developers to contribute between 20% and 30% of the total project cost as equity, although the exact amount depends on the lender and the project risk profile.

Equity may come from cash contributions, land already owned, retained profits from previous developments or even enabling works done prior drawing down from a development funding loan facility.

Lenders use equity requirements to ensure developers have financially committed to the project – effectively ensuring they have “skin the game”. Experience from past cycles, including the Global Financial Crises, has shown that risk tolerance can differ significantly when deveopers are using external capital versus their own funds.  It also provides a buffer for the lender against increases in construction costs or a softening in sale prices.

Stronger equity positions can improve the likelihood of funding approval and provide greater flexibility when structuring development finance.

How Long Are Development Loans?

Development loans are most commonly structured for 12 months, although this can vary depending on the size and complexity of the project. Smaller standalone spec builds may be suited to shorter terms (e.g. 6 months), while larger or multi-stage developments are often structured with a 12-month term and extension options. Construction programmes, product type, and the proposed exit strategy all play a role in determining the appropriate loan term.

The loan term typically runs from the first drawdown – which may include land settlement for shovel-ready projects or refinancing an existing pre-development facility – through to construction and completion. Because development projects progress in stages, funding is normally advanced through progress drawdowns as construction milestones are reached rather than as a single lump sum. This staged structure helps align funding with the project timeline and ensures costs are released as work is completed.

Do I Need Presales to Secure Development Finance?

Presale requirements vary significantly between lenders. Main banks often require high levels of presale cover (in some cases up to 120% of the debt), whereas non-bank lenders such as ASAP Finance may fund projects without any presales.

The majority of projects we fund at ASAP Finance commence without initial presale cover, with developers typically choosing to market and sell the properties during the construction phase.

It is also important to note that presale requirements are often deal-specific. Larger or higher-risk developments may require stronger presale cover, while simpler projects with higher equity contributions may not require any presales at all.

What Happens if Construction Costs Increase?

If construction costs increase during a project, developers typically rely on contingency allowances within the feasibility model to absorb unexpected expenses.

Cost increases can occur due to material price changes, labour shortages, or unforeseen site conditions. Because development projects often run for many months, it is important that your feasibility includes realistic construction estimates and adequate contingency buffers. Understanding and planning for property development risks early helps ensure projects remain financially viable even if costs rise during construction.

If the contingency within the facility is fully utilised and insufficient funds remain to cover cost overruns, the developer may be required to contribute additional equity. This is one of the key reasons lenders assess the borrower’s financial position and overall strength when structuring the facility.

What Is a Property Development Feasibility Study?

A property development feasibility study is a financial analysis used to determine whether a development project is likely to be profitable.

A feasibility study typically assesses factors such as land acquisition costs, construction costs, professional fees, financing/holding costs, and the projected end value of the completed development. Developers use a ‘feasibility’ to understand potential returns and identify risks before committing to a project. Lenders also review feasibility models carefully when assessing development finance applications to ensure the project remains viable under different market conditions.

Can First-Time Developers Get Development Finance?

Yes, first-time developers can obtain development finance, although lenders generally assess these projects more carefully.

Without an established development track record, lenders may limit or reduce key funding metrics, or place greater emphasis on the developer’s financial position, experience of the builder and wider team of consultants. Many new developers begin with smaller projects or work alongside experienced professionals to strengthen their funding applications. ASAP Finance provided this type of assistance for a nine-unit block in Mt. Wellington project led by first-time developers.

Property Development Glossary

Development Finance

Development finance refers to specialised funding used to support property development projects. These loans typically short or fixed-term loans (often around 12 months) and cover land acquisition or refinance of pre-development loan facilities, construction costs, and project-related expenses. They are structured around the project timeline.

Equity

Equity is the developer’s financial contribution to the project. It may come from cash, land value, retained profits or funds injected into the development such consenting costs and construction. It represents the developer’s share of the project’s total cost.

Feasibility Study

A project “feasibility” evaluates the financial viability of a development project by comparing total development costs with the projected value of the completed project.

Gross Realisation Value (GRV)

GRV refers to a project’s Gross Realisation Value – the estimated total revenue of the development, being the combined value of all properties once completed and sold or refinanced. Lenders commonly use GRV as a key metric when assessing project viability.

Loan-to-Cost (LTC)

Loan-to-cost (LTC) measures the percentage of total project costs that a lender is willing to fund. Total project costs typically include land acquisition, consenting, construction, professional and consultant fees, finance and holding costs, and contingency. It is a key metric used to determine the level of equity required from the developer.

Presales

Presales occur when properties within a development are sold off-plan i.e. before construction is completed. Lenders may require presales to demonstrate market demand, validate price points, and strengthen the project’s exit strategy.

Progress Drawdowns

Progress drawdowns refer to the staged release of development funding as construction milestones are completed. Lenders typically require quantity surveyor reports before each drawdown.

Development Finance Guidance from ASAP Finance

Property development involves many moving parts, and understanding how funding structures work is an important part of managing risk and ensuring project viability.

At ASAP Finance, we work with developers to structure development and construction loans that support projects from site acquisition through to completion. By aligning finance structures with project timelines and feasibility models, developers can approach their projects with greater certainty.

If you are planning a development or want clarity around how property development finance works, get in touch with the team at ASAP Finance to discuss your plans.

Property development offers significant opportunities to create value in the New Zealand property market, but it also involves a range of risks that must be carefully managed. From construction cost increases to market fluctuations and funding constraints, even well-planned projects can face challenges if potential risks are not identified and mitigated.

While these risks are widely understood at a high level, what matters in practice is how they affect a project’s ability to be funded, delivered, and exited successfully. Lenders assess projects through this lens, which means developers who take a structured approach to risk are better positioned to secure funding and achieve consistent outcomes.

Common Property Development Risks

Once you understand how property development finance works, the next step is to familiarise yourself with the potential risks that accompany each project. Property development projects face several categories of risk that can affect both project viability and profitability. While these variables cannot always be eliminated or controlled, experienced developers plan for them early and structure their projects to reduce potential impacts.

Construction Delays and Cost Overruns

Construction risk remains one of the most significant challenges in property development. Cost increases, labour shortages, and delays can all impact both timeline and total project cost. Even relatively modest overruns can reduce profit margins, particularly where projects are tightly structured.

Delays also extend holding costs and interest exposure, which can compound quickly over the life of a project.

To mitigate: Developers typically manage these risks by working with experienced builders, securing fixed-price contracts where possible, and creating detailed cost estimates during the feasibility stage. Including contingency allowances within the project budget also provides a financial buffer if unexpected costs arise. This includes completing critical infrastructure works such as stormwater and wastewater connections, along with driveway construction, prior to vertical build to avoid delays in the titling process. It also involves locking in utility provider agreements early (such as from Vector and Watercare) where upgrades or network capacity constraints may materially impact costs.

Changing Markets

Property markets can shift during the lifecycle of a development project. A project that appears profitable during the feasibility stage may face reduced demand or lower sale prices by the time construction is completed.

Changing economic conditions or buyer preferences can all influence resale values. Developments that take several years from acquisition to completion may be exposed to these types of market fluctuations. The key risk is not that markets move, but that feasibility assumptions fail to allow for it.

To mitigate: Developers often adopt conservative assumptions when estimating projected sale values. Conducting detailed market research, analysing comparable sales, and aligning the project design with local buyer demand can all help improve the likelihood of achieving targeted prices. Obtaining pre-sale cover can provide additional confidence to both lenders and developers by validating pricing assumptions and demonstrating market depth, although it is not always a requirement depending on the funding structure.

Interest Rates and Funding Risk

Because property development projects rely heavily on borrowed capital, financing conditions play an important role in project viability. Rising interest rates, tightening lending criteria, or funding gaps can significantly affect cash flow during the development period.

Interest costs are typically incurred throughout the construction phase, which means unexpected rate increases or delays can materially affect project margins, particularly where funding is structured on a floating basis (e.g. BKBM plus a margin). In contrast, many non-bank lenders provide fixed rates for an agreed term, which offers greater certainty during delivery. However, if the loan term needs to be extended, re-pricing may occur at expiry, which can impact overall project returns.

To mitigate: Developers manage funding risk by stress-testing feasibility models under different interest rate scenarios and maintaining sufficient equity to support the project if conditions change. Working with lenders with extensive development finance experience can also help ensure the funding structure aligns with project timelines.

Planning and Consent Risks

Planning and regulatory approvals are another common source of uncertainty in property development. Resource consent processes, zoning restrictions, infrastructure requirements, or council compliance conditions can all delay project timelines.

Unexpected consent requirements may also increase project costs or require design changes, which can affect feasibility.

To mitigate: Developers typically undertake detailed due diligence before acquiring a site. Engaging planning consultants early and allowing realistic timeframes for approvals can help identify potential issues before construction begins. The quality of consultants and development partners also plays a critical role in the overall success of the project.

How Experienced Developers Manage Development Risk in Practice

Because development projects carry multiple layers of risk, lenders take a structured approach when assessing applications. Their goal is to help projects remain financially viable even if timelines extend or costs increase.

Feasibility Assessment

Before approving funding, lenders assess the project’s financial feasibility in detail. This includes reviewing development costs, projected end values, timelines, and contingency allowances, and considering how the project performs if conditions change.

Equity Requirements and Lending Limits

Development finance is typically structured with defined limits such as loan-to-cost (LTC) and loan-to-value ratios (LVR). These parameters ensure that developers retain meaningful equity in the project and provide a buffer if costs increase or values soften.

Staged Funding During Construction

Funding is generally released in stages as construction progresses. Drawdowns are linked to milestones and verified through inspections or reporting, helping ensure that the project remains on track and that sufficient funds remain available to complete the development.

Structuring for Property Development Success with ASAP Finance

Property development always involves some level of uncertainty. Developers who understand potential risks early are better positioned to structure projects that remain viable even if conditions change. While these risks cannot always be completely removed, they can be anticipated and managed.

At ASAP Finance, we work with developers to structure development and construction loans that shield projects from risks. Our focus is on creating funding frameworks that align with the realities of development projects, giving each project the best chance of success. If you’re planning a development and want guidance on structuring finance for your project, get in touch with the team at ASAP Finance to discuss your plans.

Property development can be a powerful way to create value in the New Zealand property market, but it is fundamentally different from traditional property investment. Rather than relying on long-term market growth, development involves actively improving land or buildings, creating value through construction or subdivision, with the intention of generating profit at completion. Property development is often considered a sort-term investment strategy compared with traditional property investment which is a long-term game.

Before committing to a project, one of the most important questions to understand is: how does property development finance work? Unlike a standard residential mortgage, development finance is structured around feasibilities, risk management, staged funding, and clearly defined exit strategies.

What Is Property Development?

Property development refers to purchasing land, or an existing property, to increase its value with the intention of selling the completed project for a profit. The nature of the development – either construction or subdivision – depends on the nature of the site. Unlike property investment, which takes a more passive approach in following market growth, development involves actively finding ways to create value.

What Counts as Property Development?

In the New Zealand context, property development typically includes:

• Renovations or flips
• Constructing new dwellings
• Subdividing land into multiple titles
• Replacing an existing dwelling with higher-density housing (such as townhouses or apartments)
• Converting or redeveloping commercial buildings
• Delivering mixed-use projects

How Development is Different from Property Investment

Property investment typically involves purchasing an existing property to generate rental income – the focus here is on yield and cashflow. After holding the asset for an extended period, subsequent (but often unrealised) profit is also generated from long-term capital gains based on market movements.

Property development is a more active approach to value creation. It requires capital, a feasibility analysis, consultant and contractor coordination, as well as the ability to balance construction and market risks within defined timeframes. Returns are not simply based on the market. In fact, pricing stability is often favourable as it often means less fluctuation in feasibility assumptions. With the exception of a falling market, liquidity and sales activity can be more important than price growth.  Disciplined execution, tight cost control, and a sound exit strategy are key to completing a successful property development project. Making this possible is a well-structured development finance.

How Does Property Development Finance Work?

Unlike a standard home loan, development finance is structured around risk, project timelines, and feasibility. Lenders make assessments holistically, examining the whole development, which includes feasibility assumptions (both as costs and end values), developer experience, consultant and contractor experience, and exit strategy strength. Funding is centred around a mix of equity and layered debt known as the capital stack.

1. The Capital Stack

• Developer equity refers to the capital you contribute to the project, whether as land value or cash. Most lenders require a meaningful equity position to absorb risk and demonstrate commitment.
• Senior debt is the primary loan (first mortgage) facility used to fund land acquisition and construction. It is typically advanced as a percentage of total project cost and/or projected end value.
• Mezzanine finance (or subordinated debt/second mortgages) is a loan that sits behind the senior first ranking mortgage. It is often used to reduce the equity requirement of the developer making their equity go further. The increased leverage can also increase the return on equity metrics; however it also increases funding costs and overall risk associated with the project.

2. Feasibility and Funding Assessment

Before approving a facility, lenders assess the project’s financial viability in detail. This is where many first-time developers underestimate the scrutiny involved. Key metrics typically include:

• Total Development Cost (TDC): land, construction, professional fees, interest, and contingencies
• Gross Realisation Value (GRV): the projected end sale value of the completed project
• Loan-to-Cost (LTC) or Loan-to-GRV ratios: how much leverage is being applied

3. Land Funding vs Construction Funding

Development finance is often structured in two parts. The first is land funding, which supports site acquisition. Depending on timing and structure, this may later roll into the construction facility. The second is construction funding, which covers build costs and associated project expenses. This is usually approved based on completed designs, fixed-price build contracts, and confirmed feasibility. Some projects may require presales before construction funding is fully advanced, although no presale development finance is also viable, depending on the lender and project.

4. Progress Drawdowns During Construction

Unlike residential mortgages, development finance is not advanced as a lump sum. Construction funds are released in stages, aligned to completed works. Before each drawdown, lenders typically require:

• A quantity surveyor (QS) report
• Confirmation of milestone completion
• Updated cost-to-complete assessment

5. Exit Strategy

Every development loan is approved with a defined exit in mind.

Common exit strategies include:

• Selling completed dwellings and repaying the facility
• Refinancing into long-term investment lending
• Staged sell-down of a multi-unit project

Lenders assess the strength and realism of the exit plan as part of approval. Without a clear and achievable exit strategy, even a profitable project on paper may struggle to secure funding.

What Lenders Look for in Development Finance Applications

Development finance approval is driven by risk assessment. Lenders evaluate not just the project, but the developer’s ability to execute and exit successfully.

At ASAP Finance, we structure applications around the factors that materially influence credit decisions.

Experience and Delivery Capability

Track record matters. Lenders assess prior project experience, financial history, and the strength of the wider team – including builders and consultants. For newer developers, conservative project scope and strong professional support become more important.

Equity and Financial Position

A meaningful equity contribution demonstrates commitment and absorbs first-loss risk. Lenders review the source of funds, liquidity, and overall financial capacity to manage unexpected delays or cost increases.

Feasibility Strength

Projected sale values, build costs, timelines, and contingency allowances must be commercially realistic. Lenders will stress-test assumptions to ensure the project remains viable under pressure.

Exit Clarity

Every facility is approved with repayment in mind. Whether through sell-down or refinance, the exit strategy must be credible and supported by market evidence.

Structuring for Property Development Success with ASAP Finance

Development finance is ultimately about aligning risk, structure, and execution. The more disciplined the preparation, the stronger the funding outcome.

The most successful property development projects in New Zealand use an appropriate structure. From acquisition through to exit, every stage of a project carries financial implications. Central to managing risk and protecting margins is close coordination and a sound understanding of how development finance enables value creation.

At ASAP Finance, we work with developers to structure development and construction loans that support projects from site purchase through to completion. Our focus is on creating a financially sound framework aligned with your goals. If you’re considering a development or want clarity around how development finance works for your next project, get in touch with the team at ASAP Finance to discuss your plans.

When it comes to property development and construction finance, progress payments form the backbone of how funds are advanced throughout a project. For lenders like ASAP Finance, this is one of the most critical aspects of loan management – ensuring funds are released only as value is created on site, and almost always on a cost-to-complete basis.

The Basics of Progress Payments

A progress payment or “drawdown” (also known as a DD) refers to the staged release of loan funds throughout the construction or subdivision process. Rather than advancing the entire facility upfront, funds are released progressively as the project reaches agreed milestones. Note, payments are almost always made on a cost-to-complete basis (which we’ve covered in a previous blog How Cost-to-Complete Funding Works in Development ).

This structure ensures borrower equity is applied first to the project and that the lender’s loan facility is sufficient to complete the project.

What Lenders Look for in Drawdown Requests

Every drawdown request is assessed on a simple principle: “after paying the DD request, is the amount being retained by the lender sufficient to complete the project?”.

While there are a range of other considerations when making a payment, the lenders final decision will eventually tie back to that fundamental question.

Consideration for Lenders

Before approving a drawdown, prudent lenders will typically consider the following. In most cases, an independent Quantity Surveyor (QS) report will also be required, which addresses many of these points in greater detail.

• Budget review: the lender will review the full project budget to identify any areas where cost increases are known or anticipated. The aim is to ensure that after the requested payment is made, the lender remains sufficient funds on a cost-to-complete basis. This includes confirming appropriate allocation of contingency sums and factoring in forward-looking costs that may not have been fully identified early in the project.
• Evidence of progress: the lender may go to site or request photos confirming works done.
• Invoices from the main contractor and relevant subcontractors: for the raw build, some lenders may not require individual subtrade invoices and instead pay per the agreed milestones (however a QS will almost certainly ask for sub trade invoice and confirmation that all previous invoices have been paid)
• Program: lenders will assess whether the project remains on track against the approved program. Delays often translate directly into increased costs, this is because capitalised interest and fees form part of the overall funding facility and budget. If the revised completion date extends beyond the original term of the loan, the lender may require evidence that the borrower can cover any resulting shortfall, which may include an additional equity injection.
• Council inspection signoffs: Evidence that key council inspections have been passed, such as drainage, pre-line, or pre-roof stages. These provide independent verification that works completed on site meet the required building standards and align with the approved plans.
• Cost over-runs: If a drawdown request exceeds the value of the completed work, the lender may only approve a partial payment. This protects the lender from over-exposure if delays, defects, or cost overruns occur later in the build.

Site visits

As mentioned, expect your lender to undertake a site visit. Site inspections are an important step, providing a real-world check against what’s claimed on paper. They also give the lender valuable insight into the quality of workmanship and general site activity. A well-organised, well-resourced and active site signals good project management, while disorganisation or inactivity can indicate emerging risks, unpaid bills or potential delays.

Council Inspections

Council inspections play a critical role in the progress payment process, serving as an independent safeguard for both lender and borrower. Each passed inspection verifies that the works completed meet building code requirements.

In a residential build, inspections typically cover key stages such as foundations, framing, and pre-line etc. while subdivision elements focus on civil works such as earthworks, utilities connections, retaining, drainage and driveway (including vehicle crossing) sign offs.

These inspections provide independent assurance that all works are compliant and completed in line with approved plans. They also help confirm there are no outstanding or remedial items that could undermine the project’s cost-to-complete position or the security of the loan.

Greenfield Land Subdivisions

Green field subdivisions carry their own complexities. Unlike infill projects, where subdivision works are relatively minor and progress can be tracked through defined structural stages, greenfield projects centre on extensive civil and infrastructure works.

Because of this, milestone-based drawdown structures are often impractical. Lenders instead rely on engineering certificates and supporting invoices to verify progress and authorise drawdowns. Given the scale and variability of such works however, QS reporting is almost always required to maintain oversight and cost control.

ASAP’s Milestone-Based Approach

Unlike traditional banks, ASAP Finance does not require QS reports to fund most projects. Instead, we take a pragmatic, milestone-based approach that streamlines the process without compromising oversight.

Our progress payment schedule is typically structured around clear, definable stages such as foundation, framing, roof on, lock-up, interior completion and so on. Each milestone would correspond to a known percentage of total build cost, making it easier for developers and builders to forecast cashflow and align payments with real progress.

By removing the QS requirement, projects move faster, incur fewer third-party costs, all while maintaining robust checks and balances through council inspection reports and site verification.

Why Lenders Take It Seriously

A disciplined drawdown process is about more than just compliance – it’s about protecting project viability. By linking payments directly to verified progress and the project’s broader cost-to-complete position, developers maintain stronger control over cashflow, lenders safeguard their exposure, and projects stay on schedule.

ASAP Finance’s model strikes the right balance between efficiency and oversight, ensuring funds are advanced promptly while maintaining the integrity and financial stability of the project.

Conclusion

At ASAP Finance, we view progress payments as prudent management, not an administrative step. Each drawdown is carefully assessed to ensure the project remains in a full cost-to-complete position – protecting momentum, minimising risk, and keeping developments moving forward with confidence.