Funding is one of the most important parts of any property development project. A strong site, capable builder and well-priced end product will not get far unless the funding structure is clear, realistic and aligned with the development programme.
For many developers, the question is not simply how to fund a development project. The better question is what funding structure best fits the site, feasibility, equity position, construction pathway and exit strategy.
This checklist sets out the key steps to work through before approaching a lender.
Step 1: Confirm What You Are Actually Funding
Start by defining the funding requirement clearly. Development finance can be used for different stages of a project, including site acquisition, refinance, civil works, construction, subdivision costs, professional fees, GST timing and capitalised interest.
Checklist: Confirm whether funding is required for land settlement, refinance, civil works, vertical construction, GST timing or all stages of the project. Then confirm the total facility required, how much needs to be advanced upfront, when progress drawdowns will be required, whether the project will be staged and how the loan will be repaid.
This matters because a development project that needs acquisition funding has a different risk profile from a project that already owns the land and only needs construction funding. Lenders will assess the purpose, timing and sequencing of the loan, not just the total amount requested.
Step 2: Build a Credible Feasibility
Knowing how to finance property development means recognising that a development feasibility is the foundation of the funding application. It should show whether the project remains commercially viable after allowing for all project costs, funding costs, contingency and realistic end values.
Checklist: Include land cost or current site value, construction costs, civil works, professional fees, consent and council costs, finance costs, GST assumptions, contingency, expected gross realisation value, development margin and timing from settlement through to repayment.
The key is not to present the most optimistic case. The key is to show that the project still works when the assumptions are tested. Lenders will look closely at whether build costs, sale prices, programme timing and contingency allowances are commercially realistic.
Step 3: Confirm Your Equity Position
Lenders expect developers to have a meaningful stake in the project. Equity helps absorb cost overruns, delays and market movements, and shows the developer is committed to the transaction.
Checklist: Identify the source of equity, including cash contributed to the project, land already owned, verified uplift in land value, shareholder loans, retained project profits or other confirmed capital sources. Also, confirm how much equity remains available as a contingency buffer.
Land equity can be particularly important. A developer who already owns the site, or has purchased it below market value, may be bringing meaningful equity into the project before adding further cash.
The equity position needs to be clear, evidenced and capable of being explained. A lender will want to understand where the equity comes from, whether it is already in the project and whether the developer has enough financial capacity to manage unexpected issues.
Step 4: Choose the Right Funding Pathway
Not every development project fits the same lending structure. The right funding pathway depends on the project, the borrower, the leverage required, presale position, documentation, timing and delivery risk.
Bank lending: Bank funding can be a good fit where a project has conservative leverage, strong presales, full documentation, a clear fixed-price construction pathway and sufficient time for approval.
Non-bank lending: A non-bank lender may be a better fit where the project has strong fundamentals but needs more flexibility around presales, leverage, timing, QS involvement, construction structure or settlement deadlines.
Mezzanine finance: Mezzanine finance may be used where the senior debt facility does not cover the full funding requirement, and the developer wants to reduce the amount of additional cash equity required. It can improve return on equity, but it also increases funding cost and risk.
The practical issue is to match the lender to the project. A transaction may be commercially sound but still fall outside bank policy. That does not necessarily mean the project is weak. It may simply require a lender prepared to assess the transaction on its full merits.
Step 5: Prepare the Funding Pack
A strong funding application is supported by clear documentation. The more complete the information, the easier it is for a lender to assess the project quickly and accurately.
Checklist: Prepare the title and ownership details, sale and purchase agreement if applicable, development feasibility, construction budget, programme, plans, consent status, builder quote or contract, consultant details, valuation if available, sales evidence, presale schedule if relevant, borrower structure, company information and details of existing debt or security.
Not every lender will require the same information in every case. However, providing a clear funding pack from the outset reduces uncertainty and helps avoid delays later in the process.
Step 6: Check the Construction Pathway
Lenders will focus closely on how the project will be delivered. A strong feasibility is not enough if the construction pathway is unclear.
Checklist: Confirm who will build the project, whether the builder has completed similar projects, whether the contract is fixed-price or cost-plus, what exclusions or provisional sums are included, how variations will be managed, whether a QS report is required, how progress claims will be verified and whether the programme is realistic.
For development and construction loans, the key issue is whether the lender can get comfortable that the project can be completed within the approved funding structure. This is why cost-to-complete control is central to most construction funding decisions.
Step 7: Confirm Consents, Staging and Timing
Funding should be aligned with the project programme. Consent status, design maturity, staging, title timing and expected Code Compliance Certificate dates can all affect how a facility is structured.
Checklist: Confirm the resource consent status, building consent status, engineering approvals, title requirements, any staging plan, expected construction commencement date, expected completion date and any timing risks that could affect settlement, drawdowns or repayment.
Having resource consent and confirmed plans in place reduces uncertainty and strengthens the application. Where documentation is still progressing, the lender will usually need to understand what is outstanding, when it will be resolved and whether any funding conditions should apply.
Step 8: Define the Exit Strategy
Every development loan is approved with repayment in mind. The exit strategy should be clear before the loan is advanced.
Checklist: Identify whether repayment will come from completed sales, staged sell-down, refinance, another asset sale, retained stock funding or a combination of sources. Then support the strategy with market evidence, comparable sales, valuation information, leasing evidence or refinance assumptions where relevant.
A vague exit strategy creates funding risk. A clear and evidence-backed exit gives the lender more confidence that the facility can be repaid on time.
Step 9: Stress-Test the Funding Structure
Before committing to the project, test what happens if things do not go exactly to plan. Small movements in cost, timing or sale price can have a meaningful impact on development margin and lender risk.
Checklist: Test the impact of higher build costs, a longer construction programme, slower sales, softer end values, delayed title or CCC, higher interest costs and any additional equity that may be required.
A project that only works under perfect conditions is unlikely to be a strong funding proposition. A project that still works after sensible stress testing is far easier for a lender to support.
Step 10: Manage the Facility Through to Completion
Securing approval is only part of the process. Development finance needs to be actively managed throughout the life of the project.
Checklist: Keep close control over drawdown timing, cost-to-complete, variations, contingency usage, construction progress, sales progress, interest and fees, covenant or condition compliance, title and CCC timing and repayment strategy.
The best funding outcomes usually come from disciplined communication and early issue management. If costs move, timelines change, or sales conditions shift, those issues should be raised early rather than left until they become problems.
Funding Your Development with ASAP Finance
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.
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 consider funding where bank lending may not be suitable, including transactions where presale requirements, higher leverage, flexible construction structures or time-sensitive settlement requirements need a practical funding solution.
If you are planning a project and want to understand how to fund it properly, contact the team at ASAP Finance to discuss your project.