Direct Lender vs Broker for Development FinanceWhat Should Developers Choose?

Developers weighing up finance options need to consider more than the interest rate. Timing, certainty and the complexity of the project can all affect which funding pathway makes sense, particularly once DA conditions, QS reports, valuations and staged drawdowns come into play.

In simple terms, a broker arranges finance on your behalf, while a direct lender provides the funds and makes the credit decision. Going direct means you can deal with the team making that decision.

This guide focuses on development finance rather than consumer home loans. The assessment criteria, documentation and drawdown structures differ, which also changes the role a broker or direct lender plays.

Assured Management is a boutique, non-bank direct lender providing first-mortgage construction and development finance across SE QLD and Northern NSW since 1998, giving developers direct access to the loans approval team. Call (07) 5578 6177.

Call: 1800 028 885 Contact us

Key Takeaways

• A broker arranges finance; a direct lender provides it. The two roles have different implications for timing and feedback.
• Development finance is assessed primarily on the project, including feasibility, valuation, costs and exit strategy, alongside the borrower’s position and experience.
• A direct lender can be a bank or a non-bank fund manager; the distinction is who decides, not the type of institution.
• Going direct suits developers who know which finance type they need and want to speak directly with the approving team.
• Using a broker suits developers who want market comparison or help packaging the deal, particularly for a first project.
• Have your feasibility, DA status, valuation, QS report and exit strategy ready, whichever path you take.

What Is the Difference Between a Broker and a Direct Lender?

A broker arranges finance on your behalf but does not provide the funds. Their role is to identify suitable lenders from their panel, package your application, and submit it. Brokers can compare multiple lenders, which is useful if you are unsure which finance type or lender suits your project.

A direct lender provides the funds and makes the credit decision. When you deal directly with a lender, you are dealing with the organisation that will approve, fund and monitor the loan.

Some non-bank lenders work closely with broker networks, and some brokers specialise in development finance. The roles are still distinct.

Quick Examples

• A developer contacts a broker to find a construction lender for a townhouse project in SE QLD. The broker matches the project to a suitable lender and submits the application, which the lender then assesses and prices.
• A developer contacts Assured Management directly. The loans approval team reviews the project and gives direct feedback on what is or is not suitable, without the deal passing through an intermediary.

Development Finance Is Not a Standard Mortgage

Development finance is assessed differently from a home loan, with greater focus on the project itself, including its feasibility, costs, valuation and exit strategy. If you are new to development finance, our Guide to Property Development Financing provides a broader overview of how this type of funding works.

For a standard mortgage, approval is largely based on the borrower’s income, expenses, liabilities and overall financial position.

For a development loan, the lender is asking: can this project be completed within the loan term, and will the exit proceeds repay the facility? Development finance is assessed primarily on the project, including feasibility, valuation, costs, timeline and exit strategy, alongside the borrower’s position and experience. Funds are also drawn down in stages as construction milestones are completed, rather than as a lump sum. The specific areas a direct lender reviews are covered later in this article, and in more detail on the Private Lender for Construction Loans page.

In development finance, a broker’s value is more likely to come from lender selection, deal structuring and application presentation than from comparing standard serviceability models.

Direct Lender vs Broker: How Do They Compare?

The main differences are potential speed, lender choice, structuring support and access to decision-makers.

A note on terminology: a direct lender can be a bank or a non-bank fund manager. The distinction is who provides the funds and makes the credit decision, not the type of institution. This applies whether you are comparing a bank, non-bank lender or private lender with a broker.

Is It Better to Use a Broker or Go Direct to a Lender for Development Finance?

There is no single best route. The right choice comes down to how much lender choice and structuring support you need, and how important direct access to the decision-maker is.

Use a Broker When:

• You want to compare multiple lenders.
• You are unsure which finance type suits your project.
• You need structuring or presentation help, particularly for a first development.
• You have limited time to approach lenders yourself.

Go Direct When:

• You know which type of finance you need.
• You want to deal directly with the decision-makers.
• You need speed and a tight feedback loop.
• You have dealt with the lender before.

A first-time developer on a complex project may get more from a broker than an experienced developer who knows exactly what they need.

How Does a Direct Lender Assess Development Finance?

When a developer approaches Assured Management directly, the loans approval team reviews five areas, published on the Developers & Finance page.

Security and Valuation

The lender assesses the security property’s current value, also known as As Is value, location, and proposed end value on completion, known as Gross Realisable Value or GRV. Assured Management lends to 65% of both the As Is valuation and the GRV, including GST. Current loan terms are on the Property Development Finance Brisbane page.

Feasibility

Total development cost, contingencies, margin, and a GRV supported by comparable sales are reviewed. A GRV that cannot be supported by comparable sales may prevent a project from proceeding.

DA Status and Delivery Team

The lender reviews the development approval or planning pathway, plans and specifications, the build contract, QS inputs, and the builder and consultant team. Having DA in place provides greater certainty around the planning pathway.

Borrower Capability and Track Record

Developer and builder experience and delivery track record are assessed. A strong, demonstrated builder reduces delivery risk. First-time developers can still access finance, but deal structure and equity carry more weight.

Exit Strategy

The lender needs to understand how the loan will be repaid, whether through presales, lot settlements, refinance or sale of completed stock. Assured Management has no regimented presale requirement. Most lending is provided without presales and is assessed on the overall merit of the project.

Development Finance Checklist

Before approaching a lender or broker, have ready:

• Feasibility: Costs, revenue and margin.
• DA status: Conditions or approval pathway if pre-DA.
• Valuation information: Current As Is value and evidence supporting the projected GRV.
• QS report or cost-to-complete: Depending on the lender’s requirements.
• Builder and consultant details: For delivery risk assessment.
• Exit strategy: How and when the loan will be repaid.

What Should You Ask a Broker Before Using One?

If you choose to work with a broker, these questions help you assess whether they are the right fit.

• Which lenders are you approaching and why? A good broker should be able to explain why each lender is suited to your project.
• What is the likely timeline and what are the key hurdles? Ask the broker to identify the likely sticking points early, such as DA status, valuation, QS and presales.
• What documents will the lender require? Incomplete applications slow the process, so know what is needed upfront.
• How will drawdowns be managed? Understand how funds are released and what role, if any, the broker plays during construction.
• Are you accredited with the lender you are recommending? Not all brokers hold direct accreditation with every lender; some refer deals on.

How Much Does a Mortgage Broker Make on a $500,000 Loan?

General mortgage context: this question applies primarily to regulated residential mortgages, but it is useful context for how brokers are paid.

Brokers are typically paid an upfront commission by the lender, not the borrower, plus a trail commission over time. Exact rates vary by lender and are disclosed under Australian credit legislation.

Brokers in regulated consumer credit are subject to the best interests duty, since 1 January 2021, under the National Consumer Credit Protection Act. Development finance may fall outside the consumer credit framework that applies to regulated residential mortgages, depending on the structure of the loan and the borrower. Remuneration can also differ from the residential model. Ask any broker directly how they are paid, by whom, and whether their recommendation reflects your project’s needs.

There is no broker commission paid when dealing with Assured Management directly.

Summary

Brokers add value through market comparison, lender selection and deal presentation. Dealing directly with a lender can make sense when you know what you need, want access to the approving team, and need a clear feedback loop from approval through to drawdown.

Assured Management provides first-mortgage development loans across SE QLD and Northern NSW from $1M to $25M. The loans approval team works directly with developers from initial enquiry through to project completion. To discuss your project, call (07) 5578 6177, free call 1800 028 885, or visit the Contact page.

Call: 1800 028 885 Contact us

Frequently Asked Questions:

What is the difference between a broker and a direct lender?

A broker matches you with suitable lenders from their panel. A direct lender provides the funds and makes the credit decision. Going direct means dealing with the team that approves, funds and monitors your loan.

Is it better to use a broker or a lender?

It depends on the project. A broker suits developers wanting market comparison or packaging help. Going direct suits those who know which finance type they need and want a shorter communication path to the lender.

What is the difference between a broker and a lender?

A lender provides the funds and makes the credit decision. A broker connects borrowers with lenders from a panel but does not fund the loan.

Can a broker source non-bank development finance?

Yes. Many brokers have panels including non-bank and private lenders. Check whether they regularly place development deals and which lenders they are directly accredited with.

What documents are typically needed for development finance approval?

Key documents include a project summary, site and title information, DA status, plans, a fixed-price building contract or QS report, a feasibility study showing total cost and GRV, cash flow forecast, sales evidence, and borrower financials and track record.

How do progress drawdowns work in construction and development loans?

Funds are released in stages as milestones are completed and verified, rather than as a lump sum upfront. Each drawdown is typically certified by a quantity surveyor, aligning funding with the build programme.

When should a developer go direct to a lender instead of using a broker?

Dealing directly with a lender can make sense when you know which finance type suits your project, want feedback directly from the lender, need speed, or have an established lender relationship.

What is the difference between a direct lender and a bank for development finance?

Banks are direct lenders, but not all direct lenders are banks. Non-bank lenders may have different credit criteria and funding structures from banks, which can provide more flexibility for some projects. Assured Management lets developers speak directly with the team approving and monitoring the loan.