Construction Funding: Your Complete Guide to Financing Building Projects in Australia

Construction projects are capital-intensive and complex and the success of your build often hinges on securing the right funding. Whether you're constructing a home, developing multi-unit dwellings or building a commercial site, construction funding offers the financial structure to support every stage of your project.

In this guide, we break down how construction funding works in Australia, explain the difference between consumer and non-consumer loans, and outline why private funding is an increasingly preferred option for investors and developers. With loan capacities up to $20 million, Innovate Funding supports projects across residential, commercial and mixed-use construction.

What is Construction Funding?

Construction funding is a specialised loan used to finance new builds, major renovations or property developments. Unlike traditional home loans, funds are released progressively aligned with the build stages and interest is only charged on the amounts drawn.

Key features:

• Progress drawdowns at build milestones

• Interest charged only on drawn funds

• Approval based on “as is” and “as if complete” valuations

• Flexible structures available via private lenders

This funding model aligns your capital needs with actual construction progress — improving cash flow, reducing holding costs, and minimising risk for both borrower and lender.

Consumer vs Non-Consumer Construction Funding

One of the most important distinctions is whether the loan is classed as consumer or non-consumer.

Consumer Construction Funding

• Regulated under the National Consumer Credit Protection (NCCP) Act

• Applies when the property will be owner-occupied

• Borrower is typically an individual, not a company

• Requires full serviceability assessment and compliance

• Offered mainly by banks or traditional lenders

These loans are suitable for owner-builders constructing their primary residence. They require more documentation and take longer to approve.

Non-Consumer Construction Funding

• Not regulated under NCCP

• Applies when the property is for investment or business purposes

• Can be held in a company, trust, or developer name

• No traditional serviceability required

• Focused on equity, project value, and repayment strategy

• Commonly funded through private lenders

At Innovate Funding, we specialise in non-consumer construction loans, providing fast, flexible finance for developers, investors and business clients Australia-wide.

Types of Construction Funding in Australia

1. Bank Construction Loans

Banks offer regulated construction loans with:

• Fixed-price building contracts

• Serviceability based on personal income

• Staged drawdowns with progress inspections

These loans are cost-effective but slow and strict — often unsuitable for developers or time-sensitive projects.

2. Private Construction Funding

Private lenders fund based on asset strength and project viability — not just credit score or income.

Benefits include:

• No serviceability or income checks

• Approval based on property value (current and future)

• Fast settlement, ideal for urgent starts or land settlements

• Tailored loan terms and exit strategies

Private construction funding is perfect for developers, owner-builders, and investors requiring flexibility, speed and large-scale capital.

Innovate Funding offers construction finance up to $20 million, with funding solutions for residential, commercial and mixed-use projects.

3. Bridging Construction Loans

Used to finance construction while waiting for a sale or refinance event to occur. Suitable for:

• Knock-down rebuilds

• Land owners transitioning to a new dwelling

• Unlocking equity during overlapping settlements

4. Secured Business Construction Loans

Business owners building commercial premises or renovating business assets may access a secured business loan with construction funding components.

How Does Construction Funding Work?

Construction loans follow a structured drawdown model:

Step 1: Valuation-Based Approval

Approval is based on two key valuation points:

• “As is” value — current land or site value

• “As if complete” value — expected value once the project is built

The loan amount is then determined based on Loan-to-Value Ratio (LVR), equity, and project feasibility — not income.

Step 2: Staged Drawdowns

Funds are released in stages as construction progresses:

1. Slab/Foundation

2. Frame

3. Lock-up

4. Fixing

5. Completion

Each stage requires confirmation of progress, typically through invoices, inspections or builder certifications.

Step 3: Interest on Drawn Amounts Only

Borrowers only pay interest on funds actually drawn. If no draw occurs, no interest is payable. Some lenders charge a line fee, but many — including Innovate Funding — structure deals with no interest until use.

Step 4: Exit Strategy

Repayment is made through:

• Refinance into a long-term mortgage

• Sale of the completed property

• Pre-agreed exit plan based on your goals

Exit clarity is essential in private construction lending.

Real-World Example: Developer Construction Funding – Sydney

A Sydney-based developer owned a $1.5 million block in Burwood. Plans were approved for three townhouses with an end value of $4.8 million and a construction cost of $2.4 million.

• Innovate Funding approved a $2.1 million construction facility

• No serviceability was required — approval based on valuations

• Funds released over 5 stages

• Interest only charged as funds were drawn

• Project refinanced at completion into a commercial loan

Who Can Use Construction Funding?

• Owner-builders funding their own residential builds

• Property developers building duplexes, townhouses or apartments

• Investors building or renovating for capital growth

• Businesses building commercial premises

Benefits of Private Construction Loans

• No income or serviceability assessments

• Fast approval — ideal for urgent builds or land settlements

• Interest only on drawn funds

• Loans up to $20 million available

• Structured to suit complex or staged developments

Common Mistakes to Avoid

• Relying on serviceability for approval — private lending doesn’t require it

• Underestimating build costs — always include a contingency buffer

• Starting before valuations or approvals are complete

• No clear exit strategy — essential for private lenders

FAQs: Construction Funding in Australia

What is construction funding?

A specialised loan where funds are released in stages during a build. Interest is only paid on drawn funds.

What’s the difference between consumer and non-consumer construction funding? Consumer loans are regulated and for owner-occupied homes. Non-consumer loans are for investment or business purposes and offer more flexibility.

Do I need to show income to qualify?

Not for non-consumer construction loans. Private lenders base approval on project value and equity.

When is interest charged?

Only when funds are drawn. If no funds are used in a period, no interest is charged.

How much can I borrow?

Innovate Funding provides private construction loans up to $20 million, depending on project value and equity.

Get Construction Funding That Works for Your Build

Whether you’re building your first duplex or a multi-million-dollar commercial project, Innovate Funding offers flexible, valuation-based construction loans tailored to your needs. We specialise in non-consumer private lending with fast approvals and structured drawdowns and can fund projects up to $20 million. Contact Innovate Funding today to get your project underway.