Simple hacks to fund your resort development project

Resort development requires a different financing structure than residential projects.

Lenders treat resort developments as commercial ventures with higher risk profiles, which changes how they assess your application, structure the loan amount, and release funds throughout the project. Understanding these differences before you approach lenders will save months of back-and-forth and help you structure your development equity in a way that actually gets approved.

Why resort projects attract different lending terms

Lenders price resort development finance based on end-buyer risk, not construction risk alone. A residential subdivision has a clear exit strategy with multiple buyers for individual lots or dwellings. A resort typically has a single commercial buyer or relies on ongoing operational income, which introduces uncertainty around your development exit strategy.

Consider a developer planning a boutique resort in Victoria's high country. The project has development approval for 12 luxury cabins on a 5-hectare site. Even with strong feasibility projections, lenders will require 30% to 40% development equity upfront because the end market is narrower than a residential subdivision. That equity covers land acquisition plus initial project costs, and it stays in the project until practical completion.

The loan to value ratio for resort developments usually caps at 60% to 70%, compared to 80% or higher for residential projects. This reflects the longer development timeline and the operational component inherent in resort projects. Your business financials will be scrutinised more closely than in a standard development loan, because lenders want confidence that you can manage both construction and the transition to operations if the project doesn't sell immediately.

How development approval affects your loan amount

You need council approval before most lenders will issue a formal offer. Some banks will provide land acquisition finance on the strength of a lodged development application, but the full project funding only releases once you have DA approval in hand.

The complexity of your development approval also affects timing and cost. A resort project in Kew East would likely involve detailed environmental, traffic, and amenity assessments beyond what a residential subdivision requires. Lenders know this, and they'll ask for evidence that all conditions of approval are either satisfied or can be satisfied within a specific timeline. If your DA approval includes staged conditions that extend 12 months or more, expect lenders to adjust the development interest rate upward or require additional equity to cover holding costs during that period.

Staged funding and how it follows your project timeline

Development finance releases in stages tied to construction milestones, not calendar dates. Your first drawdown covers land acquisition if you haven't already purchased. Subsequent drawdowns release as you complete foundations, frame and lock-up, services and fit-out, and practical completion. Each stage requires a quantity surveyor's report and lender inspection before funds release.

Resort projects often have longer gaps between drawdowns than residential builds, particularly if you're staging the project across multiple seasons or waiting for pre-sale commitments. Those gaps mean you're paying interest on drawn funds while waiting for the next release. This is where project cashflow planning becomes critical. If your development timeline includes a six-month pause between stage one and stage two, you need to account for interest on the drawn loan amount plus holding costs on the land during that period.

In our experience, developers underestimate how much working capital they need between drawdowns. A resort project with 18 to 24 months to practical completion might require $200,000 to $300,000 in accessible funds outside the loan facility just to cover project costs that don't fit neatly into a drawdown category, such as council bonds, utility connections, or design changes during construction.

Interest rate structures and how they affect total project costs

Development interest rates for resort projects sit between 7% and 11% depending on your LVR, project feasibility, and whether you have presale commitments. Most lenders offer a variable interest rate structure with an option to fix portions of the loan amount if you have a contracted buyer or a joint venture partner willing to underwrite part of the project.

The interest capitalises monthly and gets added to your loan balance, which means your total debt increases throughout the project. On a $3 million development loan at 8.5% over 18 months, capitalised interest adds roughly $400,000 to your total project costs. That figure assumes you draw the full loan amount upfront, which you won't, but even with staged drawdowns you're still looking at $250,000 to $300,000 in capitalised interest by practical completion.

Some developers use mezzanine finance or a second mortgage to reduce the loan amount from the primary lender and avoid crossing into a higher interest rate tier. That can work if your development equity is tied up in another project or property, but mezzanine finance typically costs 12% to 15%, so the blended rate needs to pencil out against the saving on the first mortgage.

What lenders actually want to see in your feasibility study

Lenders want evidence that the project generates enough margin to cover cost overruns and still deliver a return. Your project feasibility needs to include a detailed breakdown of development costs, a realistic development timeline with contingency periods, and an exit strategy that doesn't rely on a single buyer or perfect market conditions.

For a resort project, lenders also want to see operational feasibility if the development exit strategy includes holding and operating the asset. That means projected occupancy rates, comparable properties in the area, and a management structure that can run the resort once it's complete. If you're planning to sell on completion, they'll want evidence of buyer interest, whether that's through a contracted presale, expressions of interest from hotel groups, or comparable sales in the region.

Project documentation should also cover how you'll fund any gap between the loan amount and total project costs. If your development costs are $5 million and the lender approves $3.5 million at 70% LVR, the remaining $1.5 million comes from your development equity. Lenders want to see that equity sitting in a bank account or available through an unencumbered property, not projected from a future sale or refinance.

If you're considering a development project and want to understand how lenders will assess your specific scenario, reach out to someone who structures development finance regularly. Call one of our team or book a consultation at a time that works for you.

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