Business Focus Reference Sheet

FINANCE
SERIES

Property Development - Construction Loans

By Dean Holwill

The financial requirements for a residential or commercial construction project or land subdivision are ver y different to your standard mortgage or business loan. One of the key differences is that the loan is drawn recognising the borrowers funding request, but also ensuring that there are sufficient funds retained to complete the project. This cost to complete structure involves engaging external independent specialists such as valuers and quantity sur veyors. Bendigo Bank, via its subsidiar y Victorian Securities, has a professional experienced team of financial specialists in project specific development and construction. Victorian Securities can work with your Bendigo Bank Business Manager and be your contact point from the early enquir y through to loan repayment. This provides you with the benefit of partnering with financiers that specialise in property and construction. The added value that Victorian Securities brings to the relationship enhances your experience and the likelihood of a successful outcome. Victorian Securities development/ construction lending products are tailored based on a full understanding of construction requirements and issues that developers encounter. The focus is on flexibility and competitiveness with dedicated relationship support. Key benefits include: Ability to capitalise interest for the term of the loan; Flexibility on pre-sale requirements; Potential to borrow up to 70% of the end value;

Potential to borrow up to 85% of the total development costs (including property purchase); On-site assistance from your allocated project consultant; Interest is only calculated on the amount drawn; Interest is charged half yearly in arrears which assists with managing your cash flow; Excellent turnaround times for progress payments and settlements; and Repayments can be made at any time and do not incur interest penalties The success of our customers ultimately leads to our own success. We bring our experience and knowledge to the table and assess the viability of the project taking into consideration: Your experience The experience of the builder The location of the project The marketability of the project, and Economic, environment and market issues

Victorian Securities development/construction lending products are tailored based on a full understanding of construction requirements and issues that developers encounter.

We will discuss our assessment with you. Where we have concerns we will look for ways in which the project can be improved. If we dont think the project is viable, we will tell you why. If you are considering purchasing a property to develop we can undertake assessments prior to purchase and provide conditional approval for project finance. Victorian Securities stay involved through the entire process.

Bendigo Bank Ltd ABN  068 049 78, AFSL 237879, Fountain Court Bendigo Vic 3550. Copies of this and related Business Focus Reference Sheets are available from your Business Banking Manager or from our website.

www.bendigobank.com.au/business

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Business Focus Reference Sheet

Development and Construction Loans
Purpose Amount Loan to valuation ratio Interest rate Interest payment Interest calculation Capitalisation of interest payment Term Construction of residential/commercial developments and land subdivisions. $50,000 plus Loans are available to a maximum of 70% of valuation prepared by Panel Valuer. This is considerably more than the 75% of costs provided by most lenders. Variable Half yearly interest in arrears via direct debit. On daily outstanding principal balance. Option available at VSCL discretion. Generally 2 months loans can be tailored to coincide with the construction lifespan. We understand that sometimes there will be unexpected problems and it is times like these that our customers are pleased they chose us. We also understand that the project does not end with the last lick of paint or roll of carpet. We make allowance that you may need time to sell your completed development. Next time you need to finance a property development, talk to your Business Banking Manager for an introduction to Victorian Securities.

example
A Bendigo Bank business customer was in a position where he had a high interest loan that was about to expire with another lender. Not only was the loan expensive, he was unhappy with the way the construction loan operated and had experienced unsatisfactory service. This customer was in an extremely difficult position. He had a loan that was expiring in 6 weeks and was under pressure to renew the facility. He was looking for a lender who could refinance his loan and manage future construction financing on a project that had already commenced. He was also in a position where he was building 8 apartments and did not have pre-sales. If this wasnt enough, he could not demonstrate serviceability of the loan and required a facility incorporating interest capitalisation for the length of the project, until sales were achieved to clear the debt. Victorian Securities were able to assist. Victorian Securities provided a cheaper loan, organised interest capitalisation for 2 months and exercised flexibility on pre-sales as it recognised the difficulty in obtaining these during the construction process. Needless to say, the customer is very happy and understands that it was his relationship with Bendigo Bank that led to this positive outcome.

FINANCE
SERIES

Information to help you grow your business successfully. Some of the titles in this series includes:

9 Business Credit Card 9 Merchant Facilities 9 Business Loans 9 DIY Super

ACKnowLeDGements Dean Holwill is Head of Business Development Unit for Victorian Securities a subsidiary of Bendigo Bank.

ACCurACy of informAtion AnD DisCLAimer of wArrAnties.

This material contains general advice or factual information only. It is not intended as personal advice and must not be relied upon as such. You should make your own inquiries and take independent advice tailored to your specific circumstances prior to making any decisions. The Information is derived from various sources believed to be accurate and current as at the date of publication. Your use of the Information is at your sole risk. Neither Bendigo Bank Limited, its related bodies corporate or any of their directors or employees make any representation or warranty that the Information is reliable, accurate or complete at the date of publication and do not accept any liability for any loss resulting from any action or decision by you in reliance on the information or for any loss resulting from any interruption, delay in operation or transmission, virus, communications failure, internet access difficulties, or malfunction in equipment or software resulting from you subscribing to, downloading or accessing in any way the Bendigo Bank Business Focus Newsletter. Copyrights 2007. Bendigo Bank Ltd ABN  068 049 78, AFSL 237879, Fountain Court Bendigo Vic 3550. Copies of this and related Business Focus Reference Sheets are available from your Business Banking Manager or from our website.

www.bendigobank.com.au/business

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