On this page
On a small screen, scroll the table sideways to see every column.
| Project stage | Evidence and decision |
|---|---|
| Before approval | Site details, permits, project budget, builder information and proposed equity. |
| Before the first draw | Conditions to be satisfied and how borrower contributions are used. |
| During construction | Progress claims, inspections, variations and remaining cost to complete. |
| Completion | Approvals, handover requirements and outstanding contractor payments. |
| Repayment | Sale, retained cash or a separately assessed longer-term facility. |
Different projects need different assessments
Building premises for your own business is not the same as developing property for sale or investment. The lender may look at operating cash flow, project sales, rental income or a combination, depending on the transaction.
Prepare the complete development budget: acquisition, design, approvals, construction, holding costs, professional fees, finance and contingency. State whether figures include GST and obtain advice on the relevant tax treatment.
Separate the total budget from the money available today
A project budget should distinguish amounts already paid, committed costs still to come and allowances that remain uncertain. Show the source of the borrower's contribution and when it will be available. Equity represented by land value is different from cash available to pay the next invoice.
Ask whether borrower funds must be used before loan funds, alongside them or at specified stages. An approved facility may leave a cash gap at the start if the lender's conditions require a contribution first. Match that rule with deposits, design fees, permits and other pre-construction payments.
For illustration, if the remaining works and project costs are $600,000 but only $550,000 of undrawn finance and available cash remain, the project has a $50,000 funding gap. An expected rise in completed value does not pay it. Update that comparison when variations, delays or finance costs change.
Know what is fixed in the building contract
A quoted total needs to be read with the contract scope, exclusions, provisional allowances and variation process. Ask the builder and your project adviser which items can change and who bears each risk. Do not treat the words “fixed price” as an explanation of every possible additional cost.
Consider the builder's capacity, the timetable and the consequences of interruption. Appropriate due diligence and professional advice should sit beside the finance assessment. The lender's willingness to fund does not certify that the builder will complete the work on time or to the required standard.
How progressive drawdowns affect cash
Some commercial facilities allow progressive borrowing for construction. NAB describes this feature within its commercial loan range. The individual agreement sets the conditions for each draw and the associated charges.
Ask whether interest is charged on drawn funds, whether any fee applies to the committed limit and whether interest is paid from cash or added to the balance. Capitalised interest still increases the debt and may use part of the available facility.
Test a progress claim before the first one arrives
Ask what the lender requires before releasing each stage: approved work, a progress claim, an inspection or other documents. Put that process beside the builder's payment terms. A timing gap still needs cash even when the total facility appears large enough.
For illustration, a contractor payment due on Monday cannot be met from a draw that is only expected later that week unless another agreed source covers it. Resolve that timing with the relevant parties before work starts. Do not assume the builder must wait for the lender.
Confirm who funds variations and overruns, and what happens when the remaining facility is below the cost to complete. Model a delay with finance and holding costs continuing. For owner-occupied premises, add temporary rent and delayed operating receipts. A lender's inspection supports its assessment; it is not a replacement for your own construction advice.
Maintain one current project position
Keep approved variations, progress claims, payments, inspections and revised completion dates together. Reconcile them with the facility statement so the project manager and finance adviser are working from the same remaining budget. Raise a likely overrun before it becomes an unpaid claim.
Confirm how disputed work or a change of builder affects further drawings. The contract with the builder and the agreement with the lender can impose different conditions. Obtain advice on both before withholding payments or assuming unused finance remains immediately accessible.
For an owner-occupied warehouse, test the operating business paying its existing rent and construction interest for longer than planned. For a development intended for sale, test a slower sales period after completion, with holding costs continuing. These are different repayment cases and should not share one generic forecast.
Allow for the steps between finished work and repayment
Practical completion, final certification, occupation, tenant income and settlement may happen on different dates. Identify which event releases the exit funds and what must happen first. A building can look complete while a condition needed for refinance or sale remains outstanding.
If the proposed long-term lender requires a lease or evidence of business cash flow, build that into the timetable. For sales, allow for selling costs and any conditions that could delay completion. Maintain enough liquidity to carry the project through that final period instead of spending the entire contingency on construction.
Evidence the exit rather than naming one
If the plan is a sale, assess the expected net proceeds after selling and settlement costs. If it is a refinance, identify the likely assessment requirements and what happens if the completed value or rental income is lower than expected.
Read maturity, extension, security and guarantee terms alongside the drawdown schedule. The project needs both a funded route to completion and a credible way to repay once the building is finished.
Construction loan terms: establish the measurement first
A lender may limit both loan-to-value (debt divided by accepted value) and loan-to-cost (debt divided by eligible project cost). Ask whether interest, GST, professional fees and contingency are inside the limit. There is no reliable single construction LVR or price that covers owner-occupied works, speculative development and a pre-leased commercial project.
NAB’s commercial lending page specifically lists progressive construction drawdowns for its Business Market Loan, from $250,000 (checked 10 October 2026). That confirms a product feature, not your project’s eligibility or a construction rate. Obtain the required equity, drawdown charges, retained-interest allowance and valuation basis in writing.
| Question | What the answer changes |
|---|---|
| Are presales or leases required? | A lender may require evidence of the exit before funding. There is no universal presale percentage; ask which signed commitments count and which conditions must be removed. |
| When must the owner contribute equity? | Confirm whether equity must be spent before the first lender draw or alongside it. A paper equity contribution cannot pay a builder invoice. |
| How is interest paid during construction? | Interest may be paid from trading cash or capitalised within an agreed facility. Capitalising uses loan capacity and can leave less for building costs. |
| Who funds an overrun? | Agree the contingency and variation process upfront. An approved limit does not guarantee an increase. Tell the lender early and test a slower completion and sale. |
If the planned exit is delayed after completion, compare any proposed extension with commercial bridging finance before the existing facility matures.
Put a quoted construction rate in context
The RBA reported 7.23% p.a. on new small-business loans in August 2026, checked on 10 October 2026. This broad benchmark is not a construction-loan offer. Build the project forecast from interest on each drawn amount, any capitalised interest, line fees, inspections and the actual completion date.
If the completed project needs time to sell or refinance, compare the costs and conditions of a commercial bridge before assuming that exit finance will be available.