Navigating non-bank lending for your development: what you need to know
With main bank credit conditions still tight for property development, more developers are turning to non-bank lenders to get their projects off the ground. Non-bank funding can be a great option, especially for deals that fall outside traditional bank policy. But there are a few important things to watch out for.
Unlike banks, many non-bank lenders are backed by private investors or fund managers, so their pricing models can vary. Some charge line fees, typically calculated on the full approved facility (not just the drawn amount) as a monthly holding cost to compensate for tying up capital, usually ranging from 0.25% to 2% per annum.
One common mistake that trips up borrowers is thinking a 0.25% line fee sounds low, only to realise it's actually charged monthly, not annually. That can add up quickly if you're not careful.
Most non-bank lenders will also pass their legal costs on to the borrower. These are typically charged at cost and vary depending on the complexity of the deal. Things like reviewing pre-sale contracts, multiple guarantees, and builder agreements can all add up, so it’s important to budget for these early.
Line fees and legal costs aren’t necessarily dealbreakers.
In fact, they’re often just part of the cost of getting your project moving. But not all lenders charge them, and sometimes a flashy low interest rate ends up being the most expensive option once you factor in line fees, higher establishment costs, early repayment penalties, and legal fees.
That’s where we come in
At Colab, we specialise in helping builders and developers navigate the non-bank lending space. We actively model the total cost of a deal, not just the interest rate, so you can make properly informed decisions and avoid surprises down the track.
We also know that lender capacity matters. Many non-bank lenders operate with smaller loan books. Even if your deal ticks all the right boxes, they might simply be out of funds. Knowing who actually has capital to lend right now can make all the difference in getting your project moving quickly.
We’ll also help you understand how non-bank terms differ from the banks. In many cases, non-bank lenders offer greater flexibility around:
Registered valuation requirements
Equity contribution levels
QS reporting
Pre-sale conditions
That can make them ideal for land-only purchases, smaller subdivisions, turnkey projects, or other developments that don’t quite meet standard bank criteria.
We can help you:
Compare offers across funders, including line fees, legal costs, and early repayment penalties
Understand drawdown mechanics and repayment timing
Model total funding costs over the life of your project
Present your deal in a way that gives lenders confidence
Avoid paying for flexibility you don’t need
At the end of the day, what most lenders want to see is a strong exit strategy, solid equity, and confidence in your ability to deliver. If you’ve got the experience, or a solid team around you, and a well-structured plan, there are excellent funding options available.
If you’re considering non-bank finance or just want a second opinion on a deal, get in touch. A quick chat could save you thousands.