MFEG Assesses Risk Before Funding a Project

How MFEG Assesses Risk Before Funding a Project

/ Property Development Finance / By

Before providing development funding, MFEG completes a structured assessment to ensure each project is viable, profitable and appropriately protected. This process helps developers understand exactly what lenders look for when seeking property development finance or preparing early feasibility work for upcoming projects.

Key Takeaways

  • MFEG assesses developer strength, project feasibility, security, market conditions and exit pathways.
  • Loan sizing depends on LVR, LTC, equity contribution and capital stack structure.
  • Construction costs, builder due diligence and planning certainty heavily influence approval.
  • MFEG conducts stress-testing to analyse project resilience under shifting market conditions.
  • A clear exit strategy and strong liquidity improve borrower eligibility.

How MFEG Evaluates Risk Before Funding a Development Project

Developers often focus on feasibility and profit, but lenders must assess a far broader risk picture before approving any facility. At MFEG, this risk assessment framework has been refined through years of lending across residential, commercial and mixed-use projects in Australia.

1. Borrower Strength and Track Record

MFEG reviews the capability of the people behind the project. This includes:

  • Successful delivery of comparable projects
  • Any issues on past builds or financial history
  • The borrower’s liquidity and financial resilience
  • Capacity to absorb unexpected delays or cost increases

A well-established developer with proven delivery capability typically secures more favourable structuring options. This can also support access to mid-tier solutions like mezzanine finance when senior debt alone is insufficient.

2. Security Position and Asset Fundamentals

Security strength is central to risk assessment. MFEG evaluates:

  • Current land value and valuation method
  • Highest and best use
  • Encumbrances or title complexities
  • Market appeal and location fundamentals

Projects with strong underlying security align well with structured solutions such as residual stock finance, which often requires quality completed stock.

3. Planning, Permits and Approvals

Planning certainty dramatically reduces project risk. MFEG reviews:

  • Whether permits are in place
  • Planning conditions or potential objections
  • Buildability and design efficiencies
  • Impact of approvals on feasibility

Shovel-ready sites typically receive faster credit assessment and clearer lending pathways.

4. Construction Costs, Builder Strength and Contract Structure

Construction is one of the most complex risk areas. MFEG assesses:

  • Builder capability and financial position
  • Fixed-price vs cost-plus contract structures
  • Quantity surveyor reporting
  • Contingency adequacy
  • Timeframe alignment with market conditions

A stable builder and fixed-price contract strengthen lender confidence.

5. Feasibility, End Values and Market Conditions

Lenders assess both feasibility inputs and external market pressures. Key considerations include:

  • End values tested against comparable sales
  • Sales velocity, demand and competition
  • Return on cost and margin adequacy
  • Sensitivity testing under different scenarios

This step determines whether the project can withstand pricing changes, delays or market softening.

6. Exit Strategy and Repayment Pathway

A clear exit strategy is mandatory. MFEG evaluates whether the loan can be repaid through:

  • Settlement of pre-sold stock
  • Disposal of remaining stock
  • Refinance into long-term or commercial facilities
  • Alternative capital recycling pathways

Exit strength is especially important for short-term lending finance where urgency and timing play a role.

7. Capital Stack Structure and Equity Contribution

MFEG assesses whether the capital stack is balanced and realistic. This includes:

  • Developer equity position
  • Timing of equity contributions
  • Interaction with mezzanine or preferred equity finance 
  • Third-party capital involvement

A stronger equity position generally reduces borrowing risk.

8. Cash Flow, Liquidity and Working Capital

Developers must demonstrate sufficient liquidity to:

  • Meet early project costs
  • Manage delays
  • Fund variations or cost pressures
  • Sustain operations through construction

Liquidity capacity often determines whether a borrower is suited for higher-leverage options.

9. Legal, Compliance and Due Diligence Review

Before issuing terms, MFEG validates:

  • Title searches and easements
  • Planning compliance
  • Builder contracts
  • Corporate structuring
  • AML and identity requirements

This ensures the project is legally sound and ready for funding without unforeseen barriers.

Conclusion

MFEG’s risk assessment framework gives developers clarity, prepares them for lender expectations and leads to stronger funding outcomes. With structured products ranging from development finance to mezzanine and preferred equity, MFEG supports developers across multiple stages of the project lifecycle.

Speak With MFEG

If you want clarity on your funding position or support structuring a new project, contact the MFEG team today.