Development Loans

Development loans in Australia aim to provide necessary funds to support, construct or maintain business. This loans are applicable to a range of projects such as:

  • Construction
  • Purchase/Retail
  • Farming and others.

Development loans in Australia are essentially business loans. Thus, business loan is the section of the bank where you apply for that kind of funding.

However, for many rural producers there are local, state and federal governmental offices, which deal with development loans in Australia. You should approach these organisations first as they offer lower than banks interest rates.

Construction Loan in Australia

Construction loans in Australia are type of development loans which secure funds for construction. Generally, there are no requirements by the financial institutions to specify exactly how the money is distributed in the construction project.

However, many construction activities need to commence before a city council permit is issued. This applies to bulk equipment hiring, surveying, pre-assembly, preparation of business tender etc.

This means that the construction loan will not be approved by the lender, so meantime the money needs to be found elsewhere. In this case bridging loans or a bridging finance is required.

Once the paperwork is settled the borrower can switch from the bridging loan into the lower interest construction loan. This way, the project stays on track even though the proper loan was approved only later on.

How Much Can I Borrow For The Development Loan?

This varies between one financial institution to another. Most development loans in Australia are considered on individual basis.

However, there is often a minimum requirement as to how much you have to lend. Some lenders require a minimum of $100K-$300K to be borrowed.

Smaller financial institutions and government aid departments sometimes specify the maximum allowed loan. For example QRAA (Queensland State Government for Industry) will limit its loans for farmers to $500K.

Development Loan Fees and Interest Rates

There is no standard among financial institutions about fees and interest rates for development loans. For mortgages, the interest rates are more or less equal because of a strong competition in the home loan market. However, business or development loans in Australia are considered on one-to-one basis.

Development Loan Lenders

If you approach banks then development loans will always apply to business loans. Some banks like ME Bank has a dedicated section for Development and Construction Loans. You can actually approach big banking players like NAB (National Australia Bank), Westpac, Commonwealth Bank, ANZ, ME Bank and others to be considered for the business loan.

However, you need to prepare your business plan thoroughly. Remember, bankers often do not understand your business, invention or the idea. Therefore, do not bring fancy gizmos without the relevant paperwork, which at least describes the following:

  • Business Description (establishment, history, plans for future etc)
  • Product or Service (what are you selling, achievements, customer benefits)
  • Market Analysis (research your market well - bankers are not fools and they need to see a proof of your analysis)
  • Strategy and Implementation (specific management roles, budgets and way of tracking results)
  • Financial Analysis (current and projected profit and loss, cash flow etc)