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.