Over the past couple of months, we have seen a continued growth in the Non-Bank / Private Finance market in the Property market in general and particularly in the Construction Finance realm.

Due to the large number of applications the Non-Banks are seeing, we continue to experience that they are relying on existing relationships as the first layer of deal assessment. In other words, if a Non-Bank needs to assess 10 transactions on the same day, a transaction that is well packaged and comes from a trusted broker or long-term client, then it will be treated with preference compared to a transaction that comes from an unknown party. This is purely a result of the number of transactions the Non-Banks are seeing. There are literally more quality transactions than most Non-Banks have money for, so all other things being equal, the ones that come from “friendly parties” will get the nod more often than not.

As a result of the above reliance on existing relationships, the Non-Banks are almost acting like the banks used to in times gone by where you could pick up the phone, have a conversation with your bank manager and at the end of that phone conversation you will have a pretty good idea whether they will fund your project.

The Banks on the other hand now have a clearer idea on how they will handle the increased pressure from APRA.  Some clear guidelines are starting to come out of the banks, these might not be exactly what Developers want, but at least it is good to know what the banks can and cannot do. When the APRA changes initially came in, many of the banks were not sure exactly what they could and could not do.

A couple of recent examples:

  • One of the Major Banks launched a “No Pre-Sales” Construction Finance product. Yes, the LVR is very low at 45% of end value, but there is some certainty and you can always add some subordinated debt to increase the Project Debt to a more respectable level.
  • Most of the Majors are pretty keen to consider Construction Finance for Commercial Properties. This is a reflection of the current market and there will be some real opportunities over the following months for good quality Construction Finance from the banks for Commercial Property Projects.

Lastly, the market for good quality experienced sponsors is still great, whether you look at Banks or Non-Banks.  The age-old saying remains true and trusted “if you follow a good Developer, you can trust him/her to make good choices regarding product and location”

As always, feel free to contact us for a no-obligation assessment of the Construction Finance options for your next Project.

Our monthly Construction Finance Market SnapShot will provide a brief overview of the general state of the Construction Finance Market nationally.

During May, we have generally seen that the Major Banks continue to have a reduced appetite for Construction Finance.

This has created a gap in the market for the past 12 – 18 months, since there are still some good projects out there that need to be funded.

The Non-Bank sector has been very successful in filling that gap for debt pieces up to $5 million and less successful in filling the gap for debt pieces greater than $5 million.

Recently we have seen movement in the “above $5 million” space, where some of the traditional “up to $5 million” players are clubbing together and doing deals greater than $5 million and up to $15 or even $20 million.

We have also seen an influx of overseas money towards some of the proven non-bank providers that enables those non-banks to do transactions of up to $125 million at a cost that would very much compare to a funding model of a traditional bank with mezzanine added on top.

So in summary, the banks continue to do very little and, therefore, we are seeing the non-bank sector increasingly stepping up and filling the gap.

There are a number of temptations that see small Property Developers making unwise decisions which often creates a snowball effect of poor decision making. Small Property developers should carefully consider the 4 temptations including accepting the local agents’ appraisal, time and costs involved in setting up separate entities, betting the house and not allowing enough consideration for project shortfalls.

1. Accepting your Local Agents’ Appraisal as Gospel

We often see developers developing their Project Feasibility based on 1 or 2 appraisals for the end values from local agents.  These values might be correct, but often, the bank’s panel Valuer will severely discount those end values.  Beware and always adopt a more conservative end value, to avoid any nasty surprises down the track.

2. Avoiding the Time and Cost Involved in Setting up Separate Entities for each Project

Most developers execute each project through a Special Purpose Vehicle that is specifically incorporated for a single development project.  By not creating separate entities, you leave yourself open to the possibility that a delay or problem in one project can prevent sales from another good project from settling in a timely manner.

3. Bet the House

Many small developers simply do not have enough equity to develop a particular project.  An easy solution upfront might be to cross-collateralise other properties to increase the amount of equity available to the lender.  However, this can cause a tremendous amount of heartache for yourself, when you begin to struggle with partial releases and higher than expected release figures.

We highly recommend a separate loan against the collateral security and for the cash proceeds from this separate loan to be used as the additional equity.  By doing it this way, the cash contribution will allow you to finance your project as a stand-alone transaction.

4. Not Allowing Enough

To artificially make the project feasibility look better, we sometimes see developers not allow enough for; Contingency, Sell Down Period, Marketing etc.  Murphy’s Law tells us that if something can go wrong, then it certainly will go wrong.  There is nothing worse than a project being 98% complete and there are shortfalls that cannot be covered and are preventing practical completion and the subsequent settlements.  This leads to desperation and desperate people do not make good decisions.

Discuss with BEDROCK Funding, how we can help in guiding you through the process correctly and avoid costly mistakes for your current or next development project.


At BEDROCK Funding we work in the Construction Finance Industry EVERY DAY and we welcome the opportunity to assess your next project and provide you with a no obligation complete Funding Overview.  Contact us at 1800 BEDROCK or visit our website at

Packaging up a Credit Submission in the correct way can go a long way to ensure that your application for finance is successful.

No credit officer wants to slave through a 90-page document, which is why our Credit Submissions are not too long and cumbersome.  A Credit Submission should be precise and focus on the key ingredients of the transaction.  Other information in relation to the transaction should be included in the support documentation or annexures to the actual submission.

When it comes to the key ingredients, we like to use the acronym SEX;





This section is first and foremost all about the property.  Questions to be answered during this section are:

  • Where is the property located?
  • What amenities are nearby?
  • How big is the property?
  • What is the approval status of the property? And what does that allow for to be constructed on the property?
  • What is the value of the property?
  • What will the end value of the project be?
  • Is the project feasible from a financial standpoint?
  • Is there any existing debt secured by the property?
  • Are the property impacted by any adverse overlays? i.e flood impacted, cultural heritage issues, undermining, protected fauna and flora


This section is all about how the lender will get their money repaid.  Questions to be answered during this section are:

  • Is repayment dependant on sales, refinance or a combination of both?
  • Are there any pre-sales?
  • What is the product mix?
  • Are they priced at the correct level for the current market?
  • Does the market have an appetite for the style of product?
  • Are there any rental or lease agreements in place?
  • What will the Loan to Value Ratio be at completion?
  • What is the appetite from lenders for a potential refinance?


This section is all about the sponsor and key stakeholders of the transaction.  For many lenders this is the most important aspect of all.  There is an argument to be made that if you follow a great sponsor, then you can trust them to make smart decisions regarding location and style of development.  Questions to be answered during this section are:

  • Who is the sponsor?
  • What experience do they have in the delivering the style of project?
  • What is the financial capacity of the sponsor? Can they cover any unforseen cost overruns during the project?  Do they have a clean Credit history?
  • What security is the sponsor prepared to offer? Personal Guarantees, Corporate Guarantees etc.
  • Who is the builder or the principal contractor?
  • Does the sponsor have an existing relationship with the lender?

Discuss with BEDROCK Funding, how we can help in packaging your Credit Submission correctly for your current or next development project.


At BEDROCK Funding we work in the Construction Finance Industry EVERY DAY and we will welcome the opportunity to assess your next project and provide you with a no obligation complete Funding Overview.  Contact us at 1800 BEDROCK or visit our website at