Funding or Lending for Your Property Development Project?

If you’re in property development, you’re already well aware that it’s a high risk/high reward game. In order to maximise profits in a project, you’ll need to get a lot of things right. One of the biggest factors in this is whether you opt for standard lending or private funding for your property development in Australia.

Every project is different, and your decision to seek lending vs. funding will be much better informed if you’re fully across the pros and cons of your various finance options.



Bank funding is cheap, but it is slow and hard to get approved. It can be difficult to achieve the criteria that banks will set in order to fund a project. Even if the criteria is achieved, it is common for lengthy delays to occur before funding can be finalised.

That being said, it may be the preferable option if you are doing a one-off project and not looking to get into development full time. This is because there are a lot of risks attached and a higher cost of borrowing when going outside the banks.

The key things to keep in mind when considering lending is that banks:

  • Are risk-averse
  • Are the cheapest way to borrow
  • Require a lot longer timeframe
  • Require high equity contribution from the borrower
  • Require debt to be covered by pre-sales

Due to the latter three points on the list, developers will often go down the “non-traditional funding” route instead – while it’s more expensive, it’s also quicker and more flexible.


Non-bank institutional funders

This category includes any large organisation that lends money from their balance sheet - typically, these funds will focus on larger commercial transactions.

Non-bank funders include hedge funds, large real estate companies, AFSL licenced funds that deal with wholesale investors, and large corporate companies that have started lending divisions.

These companies usually lend off their balance sheets, which provides some surety that funds will be available. Of course, this means that sometimes funding is also subject to the same bureaucratic issues that can affect banks.


High net worth individuals

There are some wealthy individuals who often lend out their funds in order to get a higher return. Some of these investors will lend directly and invest in Direct Mortgage Funds simultaneously.

Securing funding from a wealthy investor offers higher flexibility and the ability to move quickly without much red tape. On the flip side, pricing is often higher.

Also, these individuals will often give a higher level of responsibility to their legal representatives to tighten their position from a legal point of view, and this can sometimes present an issue from the borrower’s point of view.


Brokers (also known as intermediaries or originators)

Brokers and/or intermediaries can help connect you with the funders listed above, and originate a transaction that is agreeable to all parties. They will usually charge a fee for putting the deal together and going through the funders, or they may be paid by the funders themselves for originating the transaction.

Some brokers, like MFEG, will have formed relationships with high net worth individuals and may even manage the transactions. The key to a reliable broker is to be across the market, with the ability to guide you through the various risks and challenges, and provide tailored advice as to the best way to structure the loan.


This is what we do at MFEG

We know who is in the market for what type of project and developer on any given day, and we understand the criteria they focus on when making investment decisions.

We facilitate a wide range of borrowing opportunities for all stages of a project’s life cycle, ranging from site acquisition through to construction and completed stock. We can provide access to senior debt, mezzanine debt and equity capital on flexible terms at attractive pricing not typically available via traditional lending avenues.

For more information, get in touch.

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