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How do you get your construction or development loan approved quickly and efficiently?

When I was undertaking my final high school studies in the mid-70s, I asked my teacher which “modern history” topics would be on the exam paper. Her response was that she did not know, but she said to me – knowing there was a cycle of topics tested each year – “If I was you, I would study the following five categories thoroughly” and then she listed them.

I was required to answer five questions out of 12 options. Four of the questions I answered were out of the five my teacher suggested I study, and the fifth was out of the additional two that I studied. I was delighted a few months after my exams to learn that I scored 98% in Level one – modern history. I turned the information I received into knowledge and then applied that knowledge by turning it into enough power so that I could achieve a mark of 98%.

Now, let me help you, as my teacher helped me, to submit the best commercial loan application you can, to give you the best chance of having your property development loan or construction loan approved by the Princeton Contributory Mortgage Fund with the most favourable outcomes, most particularly, the loan terms and conditions for you!

Importantly, if you can navigate putting together your own quality commercial loan application for direct submission to Princeton, you will save lots of time and money rather than the alternative, of going through a third-party referral source.

In taking on the role of teacher, the first information I can pass on to you is obvious, but we all forget it. The people at Princeton are human – just like you and me. So, if your loan submission looks and feels like a first-class submission, with all the relevant paperwork attached, and if your submission is written persuasively with sufficient detail, the humans at Princeton are more likely to warm to your application very early on, than not.

Accordingly, it raises two questions as follows.

1. What is Princeton looking for in your loan application?

Princeton is looking for a written submission that provides firstly, an Executive Summary followed by an Overview of who you are, what you are trying to achieve and your experience. Secondly, Princeton is looking to you to convince them that you can satisfy the 5C’s of good commercial lending, which are:

Character – Capacity – Cash Flow – Competency – Collateral

Looking at these individually using a made-up abridged example below.

Executive Summary

Proposed borrower ABC Development and Construction Pty Limited ABN 12 345 678 999 of 26 John Street BURWOOD NSW 2134 – Established for 12 years
Directors John Anderson (DOB 7/7/79) of 5 Cannons Place Parramatta NSW 2150 and Fred Hanson (DOB 29/10/83) of 915 Cumberland Ave Strathfield NSW 2135 – experienced property developers
Guarantor Mary Anderson – wife of John (DOB 31/3/81) of 5 Cannons Place Parramatta- owner of the investment 5/96 Murphy Road Kingswood being offered as security
Loan Amount $4,505,000
Term 18 months
Loan Purpose To assist with the acquisition of a site located at 22-24 Hartley Street Arncliffe NSW for $2,950,000 and to further assist with the construction of 3 terraces on the Arncliffe site.
Security offered 1. A Registered First Mortgage over the Land known as 22-24 Hartley Street Arncliffe NSW, plus
2. A registered first mortgage over 5/96 Murphy Road Street Kingswood NSW
Independent Builder Buildscope Pty Limited of Mosman NSW – a leading NSW builder with 25 years’ experience in low rise residential and freestanding dwellings
Estimate security values 1.$7,300,000 on completion
2. $597,000
$7,897,000 in total security value on completion
Loan to valuation ratio 57.05% on completion
Borrowers’ equity now $850,000 Land
$597,000 Kingswood unencumbered unit
$1,447,000 in total equity now
Breakdown of loan funds Complete land purchase $2,100,000
Professional fees (Est) $109,000
Statutory fees (Est) $83,000
Construction costs (ex GST) $1,400,000
Contingency (Est) $70,000
Marketing costs (Est) $53,000
Lenders fees and interest costs (Est) $690,000
Total $4,605,000
Asset & Liability position John Anderson – net assets of $4,148million
Fred Hanson – net assets of $3.87million
Total $8.018million


We are seeking funding to assist with the purchase of the property at Arncliffe which is being purchased for $2.95m as well as the construction of three terraces and modification to existing buildings and associated costs at the Arncliffe property. There are currently no presales and given market conditions we feel we will achieve higher end values if we delay our sales campaign for 12 months.

We have entered a contract with Buildscope Pty Limited with works scheduled to commence shortly after settlement in two months’ time. Buildscope has no relation with either the borrower or its directors.

It is our intention to sell the three terraces (units) at Arncliffe by building a presale register throughout the construction timeframe.

The main property being offered as security is located within the suburb of Arncliffe, situated approximately 11.2 kilometres west of the Sydney CBD. The subject site is close to extensive existing lifestyle and transport infrastructure. The security property is well placed to benefit from further infrastructure improvements and the associated demand for residential property within the location.

Much of the surrounding development comprises mixed-use older style buildings providing ground floor retail with upper level commercial and residential accommodation. Other surrounding developments within the immediate area include a wide variety of developments including single and double-storey residential dwellings which vary in architectural aesthetics, accommodation, size, layout and age.

Development approval for the construction of three terraces was issued by the Land & Environment Court on 6 May 2020.

John Anderson and Fred Hanson are the directors of ABC Development and Construction Pty Limited and both have significant experience in residential development and will soon commence some higher density projects. Moreover, John Anderson and Fred Hanson have a combined net asset position of $8.018m.

Our builder, Buildscope Pty is an Australian-owned full-service construction company. Operating within the greater Sydney region, the business has the capacity to deliver quality construction projects in the residential, commercial and retail sectors at competitive rates.

Buildscope specialises in residential projects ranging from custom-built homes to medium density residential and mixed-use developments.

As a one-stop construction service, they can deal with every aspect of our build. Their core services include:

  • Client and Stakeholder Liaison
  • Head Contractor Services
  • Pre-Construction
  • Procurement and Contract Administration
  • Project Management
  • Site Safety, Logistics and Trades Management
  • Construction
  • Completion and Certificate of Occupation

Buildscope’ s experienced team of Construction and Project Management professionals are committed to the principles of customer service and values engineering to deliver a quality build that is on time and on budget and we are proud to be associated with them on this and previous projects.

We fully acknowledge and expect that Princeton will want to engage their own QS on the project and we look forward to discussing this aspect with you.

Addressing your 5C’s of good commercial lending we advised as follows;

i.    Character

We believe that the directors of the borrower entity are of first-class character. We have clean credit rating reports and are honouring all our financial and contractual obligations. We have never had any default judgments or court proceedings brought against us.

ii.    Capacity

While we have requested that the interest costs on this proposed construction loan facility be capitalised, you will note from our attached financial statements that our business is very solvent as is our balance sheet and that we have significant accumulated profits and reserves of $2.45m.

iii.    Cash flow

We run monthly cash flows across our whole business and run the cash flows on every project that we are involved with. On this project of course, the cash flow is, for the most part, covered by the retention of interest that you will make as our lender.

iv.    Competency

Both John Anderson and Fred Hanson are experienced property developers. To that end, I would refer you to the scheduled attached to this application which lists our completed projects over the past 12 years. All of them were undertaken successfully and sold at a profit.

v.    Collateral

The collateral we are offering you as lender is first class security. The small investment property at Kingswood shows a net return a 4.5% per annum while the Arncliffe development site will return an IRR of 26%. Both properties will be readily saleable and I note from the executive summary that the loan to valuation ratio is 57.05%.

2. How do you put together a first-class loan application?

The second part of my teaching is a simple one and it involves advising you what paperwork you put with your loan application. The best way to do this is to write a covering letter to Princeton along the following lines.

The second part of my teaching is a simple one and it involves advising you what paperwork you put with your loan application. The best way to do this is to write a covering letter to Princeton along the following lines.

Dear Sirs

Re ABC Development and Construction Pty Limited – Loan application for $4.505million

Please find attached our loan application for your consideration. Specifically:

a) Our Executive Summary plus Overview plus answers to your 5C’s of good lending.
b) A signed assets and liability statement from each director and or guarantor.
c) A signed Princeton privacy from each director and or guarantor (ask for one if needed).
d) Our balance sheet and P&L for the financial years 30 June XX and XX.
e) Our latest rolling monthly business cash flow projections.
f) A copy of the front page of the sale contract for the Arncliffe property.
g) A copy of the building contract between ABC Development and Construction Pty Limited and Buildscope Pty Limited.
h) A copy of our feasibility study.
i) A copy of the Land and Environment Court DA judgement.
j) A schedule of our completed developments.

We look forward to an early opportunity to discuss our funding application with you including the terms and conditions of any such approval.

ABC Development and Construction Pty Limited

3. Summary

I hope my insider’s information has increased your knowledge as to how to submit a loan application which will receive the quickest and best outcome so that you are empowered to drive your business forward.

Should you require any further details or assistance with your application please do not hesitate to contact George Gadallah from Princeton on 0411 614 694.

John (JT) Thomas

This article is provided by John (JT) Thomas, a 45-year veteran of the financial services industry and since 1987 a specialist in commercial mortgage funds. Considered by many to be the grandfather of the modern commercial mortgage fund sector, JT helped establish and then manage – for 17 years – what became the largest and most successful commercial mortgage fund in Australia the Howard Mortgage Fund. At Howard’s, JT lent over $7bn in commercial loans to a variety of commercial borrowers for a variety of reasons including construction and development purposes.

JT has been proudly involved with Princeton Mortgages for eight years and sits on both the Princeton Credit Committee and the Princeton Compliance Committee as well as being an advisor to the Princeton Board.

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