Quick answer: Presales reduce market and exit risk by demonstrating demand and locking in some future settlements. The lender can test the number, value, deposit, purchaser quality, sunset/settlement terms and whether contracts are acceptable. Required presale coverage varies widely by lender and market.
Questions borrowers, investors and developers commonly ask
- Why does the lender want presales if the project already has a strong valuation?
- Do off-the-plan contracts count dollar-for-dollar toward the presale hurdle?
Presales support the debt exit
For a build-to-sell project, contracted settlements provide evidence that completed stock can repay the construction facility.
Not every contract is equal
Related purchasers, low deposits, finance conditions, long sunset clauses or concentration can reduce how much credit a lender gives to a presale.
Related guides
General information only. Commercial-property and development lending criteria vary by lender, transaction, security and market conditions. This is not legal, tax or investment advice.
Frequently asked questions
Why does the lender want presales if the project already has a strong valuation?
Presales reduce market and exit risk by demonstrating demand and locking in some future settlements. The lender can test the number, value, deposit, purchaser quality, sunset/settlement terms and whether contracts are acceptable. Required presale coverage varies widely by lender and market.
Do off-the-plan contracts count dollar-for-dollar toward the presale hurdle?
For a build-to-sell project, contracted settlements provide evidence that completed stock can repay the construction facility.
Will every lender treat this the same way?
No. Commercial and development lending policy varies materially by lender and transaction.
Should I apply before the structure is tested?
For material or unusual transactions, test lender fit and the funding structure before creating formal applications.
Sources and verification
Need help matching this to a business-finance option?
GPS Finance can review the funding purpose, conduct, documents and lender fit before you make a formal enquiry.
