Bank Construction Finance

Traditionally Construction Finance is done by Major Banks.

Major Banks are by design very sponsor centric. Their philosophy is that if we follow a good sponsor, then chances are that they will pick good projects and deliver good outcomes. So effectively a bank would first decide whether they are comfortable with the sponsor and only then would they look at the project and location.

Bank Construction Finance Sponsor Requirements

The minimum Bank Construction Finance Sponsor requirements would typically include:

Signed assets & liabilities statements and personal taxation returns for all the directors of the borrowing entity;
Past 2 years full financial statements, including balance sheet & profit and loss statements, for the borrowing entity and parent company;
Copies of ATO portals confirming that there are no outstanding or pending ATO liabilities; and
Full Group Cash Flow; providing the bank with insight into the next 12 months’ projected cash flow across all the projects of the group.

In addition to the above Sponsor requirements, banks will also have stringent construction finance requirements around pre-sales, level of equity required, location and product mix.

It is important to note that banks, like any other lender have changing appetites from time to time. Just because you could borrow 80% of cost from your bank 24 months ago, does certainly not guarantee that they would do the same loan parameters today.

Typical Lending Parameters for Bank Construction Finance

Up to 60% LVR

70% LCR

Up to 120%

Cover through the Net Proceeds of Compliant Pre-sales

Interest Rates from 3.5% p.a.

and Line Fees from 1.3% p.a.

Typical Contributions for Projects with Bank Finance

Total Development Cost

30% Developer Equity

70% Bank Debt

Bank Construction Finance

Bank Construction Finance

Bank Construction Finance Sponsor Requirements

Signed assets & liabilities statements and personal taxation returns for all the directors of the borrowing entity;

Past 2 years full financial statements, including balance sheet & profit and loss statements, for the borrowing entity and parent company;

Copies of ATO portals confirming that there are no outstanding or pending ATO liabilities; and

Full Group Cash Flow; providing the bank with insight into the next 12 months’ projected cash flow across all the projects of the group.

Typical Lending Parameters for Bank Construction Finance

Typical Contributions for Projects with Bank Finance

Total Development Cost

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