For a property developer, construction funding works very differently from a standard property loan.
The lender does not usually provide the full construction facility at the start of the project. Funds are commonly released in stages as work is completed and agreed conditions are met. Valuations, quantity surveyor reports, presales, project costs, borrower equity and the exit strategy can all affect how the facility is structured.
This guide has construction finance explained in plain English, covering what construction funding can pay for, how progress draws work, what lenders assess and how bank, non-bank and private credit pathways differ.
Key Takeaways
- Construction finance is staged funding. Drawdowns are linked to project progress rather than the entire approved amount being advanced at once.
- The lender assesses the whole project. Cost, value, equity, builder strength, approvals, presales and exit strategy can affect the lending structure.
- Valuations matter throughout the facility. A lender may require an initial valuation, progress inspections and completion valuation.
- Presale requirements vary. There is no single APRA-set minimum presale threshold for residential development lending.
- Lender type changes the funding pathway. Banks, non-bank lenders and private credit providers can apply different credit rules, pricing, leverage limits and documentation requirements.
What Construction Finance Usually Funds
Construction finance is a lending facility structured around the delivery of a building or development project.
For a property developer, the facility may sit within a broader development finance structure covering acquisition, approvals, construction, completion and refinance.
Costs that may form part of the funding structure
Depending on the lender, project and approved facility, funding may relate to:
- Land acquisition or refinance
- Approved construction costs
- Builder progress claims
- Consultant and professional fees
- Certain authority or approval costs
- Interest during construction
- Approved contingencies
- Completion costs
- Residual stock or refinance at completion
The lender will assess which costs qualify under the proposed facility. Some costs may need to be funded from the developer’s equity before lender funds can be drawn.
Blue Crane Capital works with developers and construction borrowers seeking funding for land, DA costs, soft costs, construction, completion, residual stock and refinancing.
Construction finance versus a standard property loan
A standard property facility may settle in one transaction. Construction finance usually has a drawdown schedule.
Major Australian banks use progressive drawdowns for residential construction facilities, commonly releasing funds at stages such as slab, frame, lock-up, fit-out and completion.
The ABS publishes separate data on building approvals, building activity and construction lending. These releases provide useful market context, but they do not determine how an individual lender will structure or administer a construction facility.
A developer facility can have a different draw schedule. Larger projects may use monthly progress claims, quantity surveyor reports or project-specific milestones. The core principle remains similar: lender funds are released as agreed work is completed and draw conditions are satisfied.
How Progress Draws and Valuation Milestones Work
A progress draw is a request to release part of an approved construction facility.
The lender wants evidence that the project has reached the required stage before releasing further funds.
A typical drawdown process
A developer may move through a process such as:
- The builder submits a progress claim.
- The claim is checked against the construction contract and cost plan.
- A quantity surveyor or valuer may inspect the completed works.
- The lender reviews the draw request and any remaining conditions.
- Approved funds are released.
- The undrawn balance remains available subject to facility terms.
Inspections and valuations may be required during construction to confirm completed work before more funds are provided.
Why valuations are part of construction lending
Construction finance relies heavily on the value of the lender’s security.
An initial valuation may assess:
- Current land value
- Project plans and specifications
- Estimated value on completion
- Comparable sales
- Market conditions
- Project type and location
Progress inspections can then confirm how much work has been completed.
The final valuation or inspection can support the last draw and any move into a completed-property refinance facility.
Cost movement can affect the funding position
Developers need a cost plan that reflects current construction conditions.
ABS Producer Price Index data shows Australian building construction prices rose 4.9% over the year to the June 2026 quarter. House construction prices rose 5.9%, other residential construction prices rose 4.1% and non-residential building construction prices rose 4.4%.
This does not mean every project will experience the same cost movement. It does show why lenders focus closely on contingencies, fixed-price contracts, remaining costs and the developer’s capacity to cover a funding shortfall.
If your project budget, builder contract or construction program has changed since the original finance assessment, a scenario review can help identify whether the existing lending structure still fits the project.
Why Lender Requirements Change by Project Stage
A lender looking at a cleared development site faces a different risk profile from a lender assessing a completed, income-producing asset.
Credit requirements can change as the development progresses.
Before construction
The lender may focus on:
- Site value and existing debt
- Development approval
- Construction certificate or relevant approvals
- Feasibility
- Builder credentials
- Building contract
- Presales
- Developer experience
- Equity contribution
- Expected value on completion
For NSW projects, the Department of Planning provides a practical guide to the DA process covering the main stages involved in lodging and progressing a development application.
During construction
Attention can move to:
- Progress against program
- Remaining construction costs
- Cost overruns
- Builder claims
- Quantity surveyor reports
- Presale position
- Interest budget
- Remaining facility funds
Near completion
The lender may assess:
- Practical completion
- Occupancy documentation
- Settlements
- Unsold stock
- Residual debt
- Refinance options
- Exit timing
Developers tracking project activity can refer to the ABS release on building approvals in Australia for current data on dwelling approvals and the value of approved building work.
Market activity alone does not determine lender appetite. Each lender sets credit rules around project type, location, sponsor profile, leverage, presales and exit risk.
Do all lenders require the same level of presales?
No.
APRA clarified in February 2025 that the presale levels referred to in its earlier commercial property lending review reflected industry practice observed at that time. APRA stated that it had not set a minimum presale requirement or expectation in its credit standards.
A bank may still set its own presale requirement.
A non-bank or private credit lender may assess the project using a different structure.
This makes lender fit a major part of construction finance explained properly. The issue is rarely one number in isolation. The lender assesses the full project and the proposed repayment pathway.
Bank, Non-Bank and Private Credit Pathways
Developers are not limited to one type of construction lender.
Blue Crane Capital works across major banks, second-tier lenders, private lenders and non bank lending pathways.
| Funding pathway | Common characteristics | Points a developer may review |
| Bank | Structured credit policy, formal assessment, competitive commercial pricing where criteria are met | Presales, leverage, borrower strength, builder, valuation, timing |
| Non-bank | Different credit policies and project appetite from major banks | Pricing, leverage, draw conditions, fees, reporting and exit |
| Private credit | Can support transactions that sit outside standard bank policy | Total funding cost, facility term, covenants, valuation, exit and refinance plan |
No pathway is automatically suitable for every development.
The best lending structure depends on the project economics, borrower position, timing and available lender appetite.
Developers with projects in NSW can speak with a finance broker in Sydney to review lender appetite, documentation and timing in the context of the transaction.
Private credit has become a larger part of property funding
The Reserve Bank of Australia estimated Australian private credit outstanding at about $50 billion in December 2025. The RBA noted that other estimates were much higher, including an estimate of $224 billion in assets under management, reflecting differences in definitions and gaps in available data.
The RBA reports that Australian private credit is heavily concentrated in real estate and that non-bank participation in residential construction lending has increased since 2019.
Private credit can provide another funding pathway for a developer whose transaction does not fit standard bank policy. Pricing, fees, leverage and facility conditions can differ materially, so the full structure needs review rather than focusing on the headline interest rate.
Developers comparing lending structures may find it useful to review Blue Crane Capital’s finance case studies for examples of how different property finance scenarios have been approached.
Book a Finance Conversation with Blue Crane Capital to compare lender pathways for your project scenario.
Documents to Prepare Before Approaching Lenders
Good preparation can make the lender assessment more efficient.
A developer finance submission may include:
| Document | What it helps the lender assess |
| Development approval and plans | Project scope and approval status |
| Construction contract | Build cost, builder and payment structure |
| Detailed feasibility | Project revenue, costs and expected margin |
| Quantity surveyor report | Construction cost and remaining-cost position |
| Valuation | Current and completed security value |
| Presale schedule | Sales progress and settlement profile |
| Builder details | Experience, licence, financial position and project fit |
| Borrower financial information | Capacity, equity and financial position |
| Project program | Construction timing and key milestones |
| Exit strategy | How the construction facility is expected to be repaid |
Lenders may request more information once the initial assessment begins.
Preparing the core material early gives the finance adviser a clearer basis for comparing lender appetite and potential borrowing capacity.
Your Next Construction Finance Step
Construction finance is less about finding a single loan product and more about matching the lending structure to the project. Project stage, cost, equity, valuation, presales, builder strength, draw timing and exit strategy all play a part.
Blue Crane Capital works across construction and development funding, with lender access spanning major banks, second-tier lenders, non-bank lenders and private markets. For developers, this provides a way to review several funding pathways through one assessment process rather than approaching lenders without a defined lending strategy.
If you have a live project, a settlement deadline or an existing facility that needs review, book a Finance Conversation with Blue Crane Capital to discuss the scenario and available lending pathways.
FAQs: Valuations, Presales, Drawdowns and Private Credit
What is a progress draw in construction finance?
A progress draw is the release of part of an approved construction facility after an agreed stage or amount of work has been completed.
The lender may request invoices, quantity surveyor reports, inspections or other evidence before releasing the funds.
Does construction finance charge interest on the full facility from day one?
This depends on the facility.
Progressive construction loans commonly charge interest on funds that have been drawn rather than the full approved limit.
Commercial development facilities can have different arrangements for interest, undrawn amounts, capitalised interest and fees. These terms need to be checked against the facility offer.
Are presales compulsory for development finance?
There is no universal presale rule across all lenders.
Banks may set presale requirements based on their own credit assessment. Non-bank and private credit lenders may use different criteria.
APRA has confirmed that it does not prescribe a minimum presale requirement for authorised deposit-taking institutions under its relevant commercial property credit standards.
What happens if construction costs increase?
The lender may reassess the remaining project costs, available contingency, undrawn facility amount and developer equity.
A funding gap may need to be covered by more borrower equity, a facility variation, refinance or another approved funding source. Approval of extra debt is never automatic.
Can private credit fund property development?
Yes, private credit is active in Australian property and development lending.
The lender will still assess the security, project feasibility, developer, builder, construction risk, leverage and repayment strategy. Private credit should not be treated as automatic funding when a bank declines a project.
When should a developer speak with a construction finance broker?
A finance conversation can be useful before land settlement, before construction starts, when lender terms are being compared, when costs change, when a facility is approaching expiry or when completion and refinance planning begins.
Starting with a clear project assessment gives the developer more time to review lender access, documentation and the proposed funding pathway before a settlement or construction milestone becomes time-sensitive.
Construction finance explained properly comes back to one point: the facility has to fit the project from assessment to settlement.
Disclaimer: Lending criteria, pricing, valuations, presale requirements, leverage and approval conditions vary between lenders and individual transactions. A lender must assess each application before deciding whether finance can be provided.