You've got the site. You've got the plans. You've got the builder. You've run the numbers twenty times—the project stacks up beautifully. Strong margin, realistic timeline, solid exit strategy.
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Then you sit down with the bank.
"The project looks good, but it doesn't meet our servicing criteria."
"Your presales aren't at 70% yet."
"The GDV-to-cost ratio is outside our parameters."
"Your personal income doesn't support the debt loading in our calculator."
"We need two years of development track record."
The automated systems say no. The credit policy says no. It doesn't matter that the project fundamentals are sound—you don't fit the box.
This is the reality of bank development lending in New Zealand. Banks have tightened serviceability criteria, increased presale requirements, and rely heavily on automated assessment tools. Projects that would have been funded five years ago now fall outside their appetite.
But "outside bank criteria" doesn't mean "unfundable."
It means you need development finance structured to the project's merits, not just a calculator's output.
This is where specialist development funding comes in. Let's break down how it works, when it makes sense, and how to structure development finance that banks won't touch.
Understanding why banks say no helps you position projects for alternative funding.
Banks use automated servicing calculators that assess your personal income against the proposed debt.
The problem:
Development loans are often large relative to personal income. A $2M development loan might require $200k+ annual income to meet servicing ratios—even though the project itself generates the repayment capacity, not your salary.
Real example:
The calculator can't assess project cashflow—only personal income.
Many banks now require 60-70% presales before releasing construction funding.
The problem:
Preselling 70% of a development before construction starts is:
Real example:
The presale requirement may have nothing to do with actual project risk.
Banks prefer developers with established track records—often 2+ completed projects.
The problem:
Every developer starts somewhere. First or second projects might be excellent, but banks de-risk by requiring experience that can only come from... doing developments.
Real example:
Banks typically lend 60-70% of Total Development Cost (TDC) or 70-75% of Gross Development Value (GDV).
The problem:
These LVR limits require substantial developer equity. A $3M development at 65% LVR needs $1.05M cash equity—capital many developers don't have.
Real example:
The project is viable but the developer can't bridge the equity gap.
Banks prefer shorter construction timelines—typically under 18 months.
The problem:
Larger, more complex developments naturally take longer. A 24-month timeline doesn't indicate weakness—it's realistic project planning.
Real example:
Banks have "red zones"—areas or property types they won't fund regardless of project quality.
The problem:
These restrictions are policy-driven, not project-specific. Your development in a "restricted" area might be excellent, but policy is policy.
Examples:
We don't ignore risk—we just assess it differently.
| Banks Focus On | Luminate Focuses On |
|---|---|
| Personal income servicing | Project feasibility and cashflow |
| Presale percentages | Market demand evidence and exit strategy |
| Years of track record | Quality of current project and team |
| Fixed LVR limits | Total security position and project margin |
| Automated calculations | Individual project assessment |
| Credit policy boxes | Project fundamentals |
1. Project Fundamentals
2. Development Team Quality
3. Exit Strategy Strength
4. Security Position
5. Developer Skin in the Game
We can fund projects banks decline because we're assessing the project, not just running numbers through a calculator.
We don't have one-size-fits-all development products. We structure funding to fit your situation.
What it is:
Luminate provides all construction funding from start to finish.
Best for:
Typical terms:
Example scenario:
What it is:
Luminate provides additional funding alongside a bank's senior debt, filling the equity gap.
How it works:
Bank provides: 60% of TDC (first mortgage)
Luminate provides: 20% of TDC (second mortgage/mezz)
Developer equity: 20% of TDC
Total: 100% fundingBest for:
Typical terms:
Example scenario:
What it is:
Luminate provides additional funding on top of existing bank debt when banks won't increase their facility.
Best for:
Typical terms:
Example scenario:
What it is:
Luminate provides funding across multiple titles or stages, using combinations of first and second mortgages.
Best for:
Example scenario:
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Name: James (experienced builder, 2nd development project)
Track record: Successfully completed 2-unit subdivision 2 years prior
Reputation: Excellent—known for quality work and on-time delivery
Location: Growing suburban area, 30km from Auckland CBD
Site: 2,000sqm with existing dwelling, acquired for $850k
Consent: For 6 x 3-bedroom townhouses
Target market: First home buyers and investors
Comparable sales: Recent townhouses in area selling $650-700k
Construction timeline: 16 months
Development funding makes sense when:
Contact Luminate Financial Group:
📞 Call 0800 333 400
📧 Email askus@luminate.co.nz
🌐 Visit luminate.co.nz
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Ready to bring your development project to life despite bank servicing constraints? Understanding alternative development funding structures is the first step toward successful project delivery. Contact Luminate Financial Group to discuss how our property development finance expertise can help fund your project based on its merits, not just a calculator's output.