Funding a Development Before the Build Loan Starts
Pre Construction Development Finance | Switchboard Finance
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Development Finance · Pre-Construction · Site and DA
Funding a Development Before the Build Loan Starts
A construction loan starts when you break ground, not when you buy the land. The site, the approvals and the early works all sit in an earlier funding phase, and that gap catches many self-employed developers by surprise.
Quick Answer
Pre-construction funding covers the site, the development approval and early works before a construction loan begins. It sits a phase earlier than the build facility and usually runs on shorter terms. It often pairs short-term private lending with a development finance plan.
Where the build loan actually starts
The build loan starts at slab, not at settlement. From the underwriter's seat, a development finance facility and the construction loan are two different stages of money, and most first-time developers assume they arrive together. They do not.
Buying the land, securing approval and getting the site shovel-ready all happen before a single construction drawdown is released. That means the earliest and often riskiest part of a project needs its own funding plan, and getting that plan wrong is what stalls a development before it ever breaks ground.
The phases before you break ground
Before you break ground, a development moves through a predictable sequence, and each stage carries its own funding question. It starts with site acquisition, often the largest single cost and frequently funded on a short-term basis while the rest of the project takes shape.
Next comes development approval before the build, the consent from council that turns a parcel of land into an approved project; the NSW planning system sets out how that assessment works. Then come civil works and holding costs, the roads, drainage, headworks and interest that accumulate while the site sits shovel-ready and waiting. Only once the site is approved, serviced and shovel-ready does a lender release the first construction drawdown.
Each of those phases tends to draw on a different pocket of money, which is the part first-time developers find counterintuitive. The land might be funded on a short-term facility secured against the site itself. Civil works and headworks are often carried by a mix of the developer's own cash and that same short-term debt, because a construction lender will not usually release a build drawdown to pay for work that happens before slab. Holding costs, the interest and rates that accrue while approvals are pursued, are simply a line item you budget for from day one. Seeing the phases as separate funding questions, rather than one lump, is what keeps a project solvent through the quiet months before construction starts.
What moves a pre-construction file, and what stalls it
What moves a pre-construction file is evidence that the project is real and the exit is clear. On the pre-construction files that cross my desk, the difference between a quick yes and a slow maybe usually comes down to how well the site, the approval pathway and the end plan hang together.
Moves the File
- A site under contract with clear title and zoning
- A development approval in hand or a credible pathway to one
- A realistic end value and exit, whether sale or refinance
- Genuine cash into the deal alongside the land
- A builder, costings and program taking shape
Stalls the File
- A speculative site with no approval and no timeline
- Holding costs no one has budgeted for
- An exit that depends on everything going right
- All the equity tied up in the land itself
- No costings or quantity surveyor in sight
A quantity surveyor typically comes in as you move toward the build, so in the pre-construction phase the focus stays on the site, the approval and early costings. A short-term private lending facility can carry the site until a development finance plan is in place, and our private lending explainer covers how that short-term step works. This matters even more when you are funding without pre-sales, which we cover in our guide to development finance without pre-sales.
Why equity is the real decider before the build
Equity is the real decider at this stage. A lender funding a raw or newly approved site wants to see genuine cash in the deal alongside the land, because the security is worth less while it sits undeveloped than it will be once built. A site bought well, with a real margin between what you paid and what the approved project supports, gives a funder room to move; a site bought at the top of the market with all the equity tied up in the land itself gives them none. A short, honest feasibility that still works on conservative end values does more to move a file than an optimistic one that needs everything to go right.
Rolling into the construction facility
Pre-construction debt is designed to roll into the construction facility once the site is ready. The short-term funding that carried the land and approvals is repaid or refinanced as the development or construction loan takes over at slab. Because it is a bridge between buying and building, pre-construction funding usually runs on shorter terms, typically a matter of months, indicative and varies by lender.
Planning the handover before civil works finish
Planning that handover early, so the construction facility is approved and ready to release when civil works finish, is what keeps a project moving. You can see how the whole property-secured toolkit fits together in our property lending hub.
The handover itself rewards planning. If the construction facility is only arranged once civil works finish, you can end up paying to hold the site while the build funding catches up, which erodes the very margin the project was meant to deliver. Lining up the development or construction lender in parallel with the pre-construction phase, so approval is ready to release at slab, is what keeps the two facilities from leaving a gap between them.
Funding a development is really two funding problems, not one. The site, the approval and the early works sit in a short-term, higher-risk phase before a construction lender releases a dollar, and treating that phase as an afterthought is what stalls projects before they start. Map the pre-construction phase and the build phase together, line up the exit, and the handover at slab takes care of itself.
Key takeaway: Fund the site, approval and early works as their own phase, then plan the roll into the construction facility before you break ground.Frequently Asked Questions
Financing a development site before a development approval is in place is possible, usually through a short-term facility secured against the land while the approval is pursued. Lenders look closely at the zoning, the approval pathway and your exit, because an unapproved site carries more risk. A short-term private lending facility is one common way to hold the site until a development finance plan is ready.
A construction loan generally starts once the site is approved, serviced and shovel-ready, with the first drawdown released around slab stage rather than at land settlement. Everything before that point, including the land and the approvals, sits in an earlier funding phase. Our development finance glossary explains how the stages connect.
Development finance and a construction loan cover different stages of the same project rather than competing products. Development finance is the broader structure that can fund the site, approvals and build across phases, while a construction loan is specifically the drawdown facility for the build itself from slab upward. You can compare the property-secured options in our property lending hub.
A quantity surveyor is typically engaged as a development moves toward the build, to independently assess costs and progress for the construction lender. In the pre-construction phase your focus is more on the site, the approval and early costings, with the quantity surveyor becoming central once construction funding begins. Getting costings started early still helps the later stages run smoothly.
Pre-construction development funding usually runs on shorter terms, typically a matter of months, indicative and varies by lender, because it is a bridge between buying the site and starting the build. The exact term depends on how quickly approvals and civil works progress and when the construction facility can take over. Funding a project without pre-sales can change the picture, which we cover in our guide to development finance without pre-sales.
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