Construction loans

How construction finance works

Construction finance pays for a build the way a build actually happens — in stages, not a lump sum. The facility is set against your fixed-price building contract, and funds are released as progress draws that follow the contract’s stages: deposit, base, frame, lock-up, fit-out and completion. Before each draw, a quantity surveyor certifies that the stage is finished to standard. You generally pay interest only on what has been drawn, and on most commercial builds the interest is capitalised into the facility, so there is nothing to service month to month while you build. Practical completion and the occupation certificate release the final draw; any retention is paid out once the defects period closes.

Construction finance vs development finance

The two sit close together, and the right one depends on what you are funding. Construction finance covers the build itself, against a fixed-price contract, on a site you already hold — sized on the build cost and the completed value, with the exit usually the finished premises in use or a refinance. Development finance covers the whole project, the land first and then construction, sized on project cost and the end sale value, with the exit usually end-sales. If your project still needs the site secured, that sits within a development facility scoped separately.

Where the build risk sits

The honest part of any build is the gap between the contract and what the job finally costs. A fixed-price contract caps the base, but variations, site costs, soil conditions and weather delays sit outside it, and on a long build those add up. We size the facility with room for contingency and a clear completion exit, and we will say plainly when a project does not carry enough margin or equity to absorb an overrun — rolling more debt onto a build that does not stack only enlarges the loss. A cost-plus or open-ended contract, with no fixed price to assess against, is a different conversation.

What we will need to start

Your fixed-price building contract, the approved plans and permits, your builder’s registration and insurance, and the security and exit. That is enough to give you indicative terms in days; the full file follows once it is progressing. This is business-purpose lending to companies, trusts and developers — secured against the project, not consumer credit.