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.