It is well known that to secure development finance from a major bank is getting much more difficult. Like the GFC days when it was virtually impossible to obtain finance, tighter controls continue to be implemented. Banks generally require 100% of debt coverage from pre-sales and they have pulled back on the percentage of hard costs that they will fund.
However, there are non-bank lenders and private lenders that will look at a project from a different angle to the major banks. Developer finance lenders will work off the gross realisation value (GRV) of the project rather than the traditional hard cost or total development cost (TDC) method when working out how much they will lend.
The main things non-traditional development finance lenders will look at are:
GRV development finance method explained
Gross realisation value (GRV) based first mortgage facilities look at the projected end value of the project and will extend funding to a percentage of that. In general, the maximum GRV is 65%, or 70% in some cases.
Advantages of GRV development finance
GRV development finance general guidelines
With non-bank lenders and private funders, each project is looked at on an individual basis. However, below are some guidelines that, if met, will help you secure developer finance.