Commercial Construction Loans Australia 

Australia’s construction industry accounts for 13% of Australia’s GDP (contributing around $400 billion to the Australian economy) and provides one in ten Australian jobs*. Despite the enormous size of the biggest players, small businesses actually account for around 98% of all Australian construction businesses. Some 360,000 small businesses are estimated to play their part in the construction industry and could be interested in commercial construction loans. One of the most common reasons cited for construction projects failing is due to cash flow difficulties. 

Small businesses don’t usually receive payment until the construction project is complete, this is where a commercial construction loan (a form of secured lending, such as asset finance) could be of use. Discovering the best construction loans in Australia can prove handy – so view our comparison below of the best options.

*Based on data supplied by the Australian Construction Industry Forum in November 2020, construction accounts for 9.6% of total employment across Australia.

Construction Loans: The Base Figures

Loan TypeSecuritiesTermsAvg Loan SizeEstimated Interest Rate
Construction LoanLand / Property1-7 years$500,0001.6%-15%

Best Construction Loans in Australia

#1 Fast Multi-Application

Est. 2014

Loans size & Terms

Secured and Unsecured Loans, Line of Credit, Business Overdraft, Equipment Finance

Lend Business Loans Review
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#2 Capify: Veteran Lender with a Diversified Offering

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  • Fewest documents required for sign up
  • Industry veteran for 17 years
  • the FIRST Australian online business lender
  • 99% positive client reviews
  • Multiple banking awards
  • More than $500,000,000 in funding since inception
  • Global brand
  • Min monthly turnover $10,000
  • Smaller scale than Prospa
  • 3% origination fee
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#3 Unsecured Line of Credit for SMEs

ZipBusiness, previously SpotCap, provides versatile construction loans for businesses in Australia. Offering alternative, unsecured loans can be a better option for tradies. Either helping firms to boost their services or keep a steady cash flow during the off season.

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  • Unsecured Line of Credit
  • Highest Loan Amount of All Lenders
  • Clear Terms and Conditions
  • Reply Within 24h
  • All Client Reviews are Highly Positive
  • Avg Interest Rate ~10%/yr
  • High Requirements - Min. 200,000 annual turnover
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Additional Experienced Construction & Property-Backed Secured Based Lenders

We have listed a number of Australia’s leading online business lenders who are used to providing multi-purpose business loans, either on a secured or unsecured basis. Here we list lenders with specific construction loan experience.

Maxiron Capital – Best for large-scale projects

Maxiron Capital commercial construction finance is advertised as up to $2,000,000 with funding possible in under 24 hours. Its case studies also demonstrate that should a borrower require more capital, they will consider this too. In fact, Maxiron refers to previous clients who have borrowed $3.5m and $15.2m for the continuation of their construction projects. 

To qualify for Maxiron Capital construction finance, borrowers must:

  • Have a registered ABN.
  • Be a contractor, subcontractor or a qualified builder.
  • Be able to demonstrate a detailed building plan (such as floor plan, raw material requirements,profit projections and subcontractors etc)
  • Present a licensed builder (if the borrower is not building property themselves).
  • Realistically forecast the GDV (value of finished goods).

 Maxiron Capital construction finance case study:


RAMS – Best for SME/self-employed property developers

RAMS offers a range of everyday home loan and deposit products, and has a specific campaign targeting individuals and businesses looking at constructing a property.

For construction projects, RAMS has some unique features:

  • Loan repayments during the build to be interest only, helping borrowers manage their budget.
  • A 24-month term to complete the build.
  • Accessible to both owner occupiers and investors.
  • A local RAMS Home Loan specialist to guide through the process.

RAMS construction finance can be combined with the RAMS essential home loan which provides home loans of 70%-80% of the value of the property. RAMS has been the winner of the Best Self-Employed Lender for four years running at the Australian Lending Awards (2017-2020). 


How Do Construction Loans in Australia Work?

Construction loans are usually taken on a mid term basis – the idea is that the finance cycle matches the length of the construction cycle, so really however long the project is set to take, the finance should be of a similar term. . This will vary depending on individual circumstances and the scope of the construction project but could be anywhere from a year through to much longer for large scale construction projects.

A construction loan is intended to cover the costs of building a structure on an undeveloped piece of land or property. Usually around 80% of a project’s ‘hard costs’ are financed but some construction lenders will provide capital for ‘soft costs’ too and will consider the overall cost of the construction project. The amount of finance offered can also be dependent on the projected value of the property once development is complete (known as gross development value or GDV). If a construction loan is based on GDV and the property has sufficient resale value, this could be one way to cover 100% of the construction costs. The property or building being constructed will be used as a form of security in order to secure the loan.

Once the development is finished, the property will either be sold or the construction firm will receive complete payment for the project and the construction loan can be repaid.

It can be quite common for construction loans to be released in stages, following the progression of the project:

  1. Initial sum on loan approval
  2. Completion of foundation
  3. Completion of structure framing
  4. Completion of roof and walls

Different terms can be negotiated with lenders but it’s important to determine exactly where each stage of construction starts and finishes so that developers can be absolutely sure when the next injection of cash will be released. Matching a construction loan with the cash life cycle of the construction project ensures that cash doesn’t run dry and there are no unnecessary delays.

Our Take on Australia’s Construction Industry in 2021 and How Alternative Financing Options Will Become Increasingly Important

In April 2020, Australia’s PCI (a seasonally adjusted national index based on activity, orders, deliveries and employment in construction) contracted more than 20 points, representing its lowest-ever value and wreaking havoc over the construction industry. Despite this retraction, it was widely expected construction would recover in the years to come. 

In fact, it was speculated that as western countries got to grips with the pandemic, the current global real estate boom would also lead to a construction boom.

Fast forward to May 2021 and we can say that whilst we haven’t seen a construction boom, the Australian construction industry is starting to recover. Australian PCI improved by 2.3 points to 57.6 in December 2020 and January 2021 with commercial construction being up 9.7 points to 62.5, indicating four consecutive months of positive growth and the strongest result since July 2017 (PCI readings above 50 indicate expansion in activity, with higher results indicating a faster expansion). Ai Group Head of Policy, Peter Burn, had this to say: “The stronger performance of Australia’s construction sector over the months of December 2020 and January 2021 is further evidence of the extension of the recovery from the depths of the COVID-19 crisis.” 

The main construction industry lagging is the development of new apartments. Given recent events, consumer behaviour is changing with more demand for detached houses in rural areas. With this in mind data supplied by the Australian Construction Industry Forum forecasts construction work to be down 3.2% in 2020-21 but to recover to 2.3% growth in 2021-22.

Quite how fast the Australian construction industry recovers remains to be seen, but with continued supply chain disruption expected (albeit smaller than the disruption in 2020),  inflationary concerns on the horizon and an expected increase to interest rates which have been at an all time low, and Australia could be heading for the perfect storm that could lead construction companies to borrow short-term funds to meet the rising demand. If inflation does rear its ugly head, and with it interest rates rise, we’ll be looking at many construction businesses in Australia trying to refinance their debt to keep afloat.

In either case, the coming years will be massive  for non-bank construction financing. Lend, Australia’s biggest online loan matcher, is constantly building up its list of lending partners in this specific sector of construction finance.

Commercial Construction Loans Comparison & What To Expect

If a business has a concise construction plan, including construction timelines, a realistic Gross Development Value (GDV) assessment and a good credit history, it is possible to secure construction finance in as little as 24-48 hours. If a project is considered more risky or larger in scale then financing can take a little longer. That’s not to say it’s not possible though as one of the biggest benefits to commercial construction financing is it can allow businesses to take on larger projects and reach a new level. 

Construction loans rates vary depending on the scope of the project and the individual risk profile but most lenders will be happy to provide a loan around 70-80 per cent of the GDV if approved. Like other business loans, construction loans can come with arrangement fees, early-exit fees and valuation fees if necessary. That is why it’s important to compare small business loans providers.

Is Security Required For Commercial Construction Financing?

The property that is being built or upgraded in the construction project will act as security in the financing process. Very rarely will developers have to provide additional forms of security for a construction loan. 

Construction Invoice Factoring

Construction invoice factoring works just like any other form of invoice finance. The facility allows construction companies to access money from unpaid invoices prior to the original due date of client invoices, albeit at a small discount. The reason many lenders will specifically call it ‘construction invoice factoring’ is they know it can be particularly useful for construction companies as the industry traditionally settles invoices much slower than other industries.

Construction invoice factoring essentially allows borrowers to advance the majority of their incoming receipts (usually around 80-90% of the value of the unpaid invoices) that they are expecting to receive for jobs they have completed. So borrowers don’t have to wait the full 30, 60 or 120 days for payment. Once the payment terms are up and the lender receives the full value of the invoice, borrowers will receive the rest of the unpaid balance of the invoice, less the lender’s fees.

Having immediate access to cash allows construction firms to pay staff, purchase raw materials, hire equipment and pay its own suppliers. It may be that construction firms can even outsource the account receivables process, freeing up time to focus on construction and less time chasing invoices. The solution is also scalable because as the size of a company’s invoices grow, naturally the amount they can receive through commercial invoice factoring grows too. Borrowers won’t have to worry about outgrowing and renegotiating any debt facilities they have with their existing lenders.


Alternative Forms of Commercial Construction Financing 

There are a variety of other financing solutions available which can be of a major help to construction firms. If a firm needs additional equipment, such as construction machinery or company vehicles, then equipment financing could be an appropriate solution.

Other types of finance, including unsecured business loans can also be used to raise money for construction projects. However, business owners will need to check if the repayment terms are suitable for a project that will not generate income for some time.


Final Words: Are SME Commercial Construction Loans Viable?

For businesses operating in the construction and building industry, it is of vital importance to keep consistent cash flow throughout a construction project. Man hours, machinery costs and raw material costs are pre-planned but inevitably projects will sometimes go over budget. Being unable to finish a project can obviously have dire consequences on revenue and the reputation of the business.

Commercial construction loans can be of a huge benefit in maintaining cash flow throughout a project and in growing a business to levels never achieved before. For some construction firms or particular projects it can be difficult to attain dedicated construction loans so it may prove worthwhile considering alternative forms of construction financing such as unsecured business loans or equipment financing. If a developer has a number of unpaid invoices from previous construction projects then construction invoice factoring could easily generate cash flow right away.