Funding Types

Cost Based Finance

Finance against costs is a more common institution based lending style for developments. An institution will generally lend against both the hard and soft costs of the development, also known as total development cost (TDC) based finance.

Funding against costs can be all that is required depending on the level of equity a developer has in the project and in particular the level of equity attributable to the land component with a DA approval. Finance using this method can often be most cost effective method of development finance.

Gross Realisation Finance

Development finance using the gross Realisation method is funding against the gross realisable value (GRV) i.e. the end value of the project, excluding GST. Finance on gross realisation can allow you to finance close to 100% of the total development costs by structuring a facility based on 75% of the properties completed end value.

In this instance funding using Gross Realisation minimises the equity contribution required by the developer to complete the project, this inturn provides a much greater internal rate of return. A development finance facility at 75% of GRV usually involves the use of a first and second mortgage (blended) facility.

Mezzanine Finance

Mezzanine finance bridges the gap between a developer's primary (first mortgage) and the projects total development costs (TDC). Where traditional institutions can offer a first mortgage debt facility financed against a percentage of costs, mezzanine finance can be used to finance the additional component of the projects costs not covered by the facility limit provided by the first mortgagee.

To discuss your requirements in detail and to find out what type of development finance facility is most suited to your project, Contact Us to speak to one of our expert commercial lending advisors today.