How to choose the right lender for your property development 

If you’re developing property in Australia, whether it’s residential or commercial, getting the right finance is essential. And it’s not just about the amount you borrow; the lender you choose can shape your project’s speed, cost and ultimate success. 

While banks have traditionally been the go-to option, private lenders are quickly gaining ground. CBRE data shows their share of commercial loans has quadrupled from 4% in 2016 to 16% by June 2025,  thanks to growing demand for speed and flexibility.  

But before you decide who to borrow from, it helps to be clear on exactly what development finance is and how it works. 

What is development finance? 

Development finance is a short-term funding solution, usually 6 to 24 months, designed to cover both land acquisition and construction costs within one facility. Unlike construction finance, which only funds the building stage, development finance supports the entire project from site purchase through to completion. 

Funds are typically advanced in stages, linked to key project milestones and verified by a quantity surveyor. This progressive drawdown reduces interest costs, as you only pay interest on the funds you’ve accessed. 

The amount you can borrow is often based on the Gross Realisation Value (GRV), which is the estimated end value of the completed project, rather than just the current land value. Repayment generally occurs from the sale of completed units or buildings, rather than from rental income. 

By covering land purchase, construction and all associated costs in one package, development finance gives developers greater flexibility to complete projects without juggling multiple loans or funding sources. Interest costs can also be capitalised and built into the facility, so there are no borrowing costs to pay until the project is completed and the property is sold. This structure helps developers avoid cashflow issues during construction, allowing them to focus on delivery rather than servicing debt along the way. 

The next question is: where should you get it from? One option is to go through a traditional lender. 

Traditional lenders 

Traditional lenders, such as major banks and non-bank lenders, are a common source of development finance in Australia. They typically offer competitive interest rates and can provide larger loan amounts.  

Banks are regulated by the Australian Prudential Regulation Authority (APRA), while non-bank lenders fall under the oversight of the financial services regulator, ASIC. Non-bank lenders must hold an Australian credit licence or operate as an authorised representative of a licence holder under the National Consumer Credit Protection Act. 

Both banks and non-bank lenders typically operate with a defined risk appetite, which influences their pricing and lending criteria. Those with lower risk tolerance often offer more competitive rates but can have stricter lending requirements. This may include a significant deposit and rigid conditions for pre-sales or pre-leases before releasing funds. 

Bank and non-bank lenders will likely need detailed project plans, including council approvals and construction contracts, as well as demonstrated experience in property development. For new developers without a proven track record, meeting these requirements can be difficult. 

Additionally, while these lenders usually offer lower interest rates, the approval process can be lengthy. Due diligence, valuation and risk assessments mean developers may wait longer before receiving funds. As a result, more developers are turning to private lenders for a faster turnaround. 

Private lenders 

A private lender can be an individual, a group of investors or a company that provides loans directly to borrowers. These lenders are playing a bigger role in Australia’s financial market. According to CBRE, private credit made up 26% of residential development finance by June 2025.  

Unlike banks, which are regulated by APRA and ASIC, private lenders operate under a different framework. If they only offer loans not covered by the National Credit Code, such as short-term business loans, bridging finance or some types of development finance, they face lighter regulation. In these cases, they generally don’t need an Australian credit licence (unless they also engage in consumer lending).  

However, they are still subject to general laws like the Australian Consumer Law, which prohibits misleading or deceptive conduct, and must comply with contract law. They also have to meet anti-money laundering and counter-terrorism financing (AML/CTF) obligations through AUSTRAC. 

Without the same level of regulation as banks, private lenders can assess projects on a case-by-case basis and make decisions more quickly. They often have more flexible lending criteria, including for less experienced developers or unconventional projects, and may be more willing to finance smaller or higher-risk developments. 

However, private lenders take on more risk, and they price this risk accordingly. This can mean higher interest rates and fees compared to banks and non-banks. 

Which option is right for your development? 

Choosing between traditional and private lenders depends on the size, scope and risk profile of your project as well as your own financial position. For established developers with proven track records, traditional or non-bank lenders can be a strong option.  

Private lenders, on the other hand, can be a valuable alternative when speed, flexibility or accommodating non-standard projects is critical. They are often a good fit when: 

• The deal is time-sensitive and needs to settle quickly. For example, securing a prime site before a competitor moves in. 

• Standard documentation isn’t available, such as when your business is new and doesn’t have the required financial records. 

• The property or project falls outside institutional lending norms, like mixed-use developments or high-density projects in emerging suburbs. 

• Short-term funding is required with a clear exit strategy, such as refinancing with a bank once presales or construction milestones are met. 
   
• In these situations, private lenders can approve and release funds faster than banks, often within days rather than weeks or months. Their assessment process focuses on the project’s potential and the exit plan rather than just your historical financial position, allowing them to tailor terms to the deal instead of relying on rigid institutional rules. 

Working with an experienced finance broker can make a significant difference. A broker understands the benefits of both standard banks and private lenders and can match your project with the right lender quickly. We can navigate complex application processes, negotiate terms and help you avoid costly delays, ultimately ensuring you secure the most suitable finance for your needs. 

Ready to secure the right development finance for your project? Whether you are an established developer with lots of experience or a new team needing funding for your first project, Finance Advisory Co can help. Contact us by filling in this online form, calling 0426 236 007 or emailing ben@finad.com.au. 

Credit Representative 541104 is authorised under Australian Credit Licence 389328.  Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.