As a landscaper, you might find yourself taking on bigger projects that require substantial upfront investment. Whether you're working on major home renovations, new build landscaping, or house & land packages, understanding construction loan structures can open up new opportunities for your business.
What Makes Construction Loans Different
Construction loans work differently from standard home loans. Instead of receiving the full loan amount upfront, you access funds through progressive drawdown as work progresses. This structure means you only charge interest on the amount drawn down, which can significantly reduce your borrowing costs during the construction phase.
The loan amount is released in instalments based on construction milestones, with progress payments made as specific stages are completed. This approach protects both you and the lender by ensuring funds are only released when work has been verified.
How Progressive Payment Schedules Work
When applying for a loan, you'll need to provide a Progressive Payment Schedule that outlines:
• Various stages of the project
• Expected completion dates for each milestone
• Payment amounts for each stage
• Details of any sub-contractors you need to pay
This schedule typically covers everything from initial site preparation to final completion. For landscaping projects, this might include excavation, drainage installation, hardscaping, planting, and final finishing touches.
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Understanding Valuation Requirements
Lenders use an 'as if complete' valuation method, which estimates the property's value once all work is finished. This valuation helps determine your maximum loan amount and ensures the project adds appropriate value to justify the investment.
You'll also need council plans and permits before funds can be released. This includes ensuring the project complies with council restrictions and council regulations, and obtaining any necessary development application approvals.
Key Features of Construction Loan Structures
Most construction loans offer:
• Interest-only repayment options during the building phase
• Progressive Drawing Fees for each payment release
• Flexibility to handle additional payments when project scope changes
• Options to access Construction Loan options from banks and lenders across Australia
The interest rate during construction is often variable, converting to your chosen rate structure once building is complete. You'll typically need to commence building within a set period from the Disclosure Date to avoid penalty fees.
Planning Your Construction Project
Successful construction financing starts with thorough planning. You need to:
- Make a plan that includes detailed costings
- Identify the ideal location and confirm it's suitable land
- Determine your price range and loan amount requirements
- Decide whether to demolish existing property or work with the current structure
- Consider any Out of Contract Items not included in fixed price contracts
For landscapers working with plumbers, electricians, and registered builder partners, coordination becomes crucial. Your payment schedule needs to align with when you need to pay sub-contractors and ensure cash flow remains positive throughout the project.
Working with Different Project Types
Construction loans can support various project types relevant to landscaping businesses:
• Major residential renovations requiring extensive outdoor work
• New build projects where landscaping is part of the overall development
• Buying off the plan developments where landscaping is a separate contract
• Home improvement loan projects focusing on outdoor living spaces
Each project type has different requirements and timelines, affecting how you structure your Progressive Payment Schedule and manage cash flow.
Making Construction Loans Work for Your Business
The streamlined application process available through specialist brokers can help landscapers access funding more efficiently. Having someone who understands both construction financing and the trades industry can make a significant difference in securing appropriate funding.
When considering construction financing, think about how it fits with your business growth plans. These loans can help you take on larger projects, work with premium clients, and expand your service offerings beyond standard maintenance work.
Construction loan structures offer landscapers a pathway to bigger projects and business growth. Understanding how progressive drawdowns, interest calculations, and payment schedules work puts you in a stronger position to take advantage of opportunities when they arise.
Call one of our team or book an appointment at a time that works for you to discuss how construction loan structures could support your landscaping business growth.
