Bank vs Non-Bank Funding in 2026: Who’s Better for Developers?
As we move into 2026, property developers in New Zealand are facing a very different lending landscape to what existed just a few years ago. While interest rates are stabilising and confidence is slowly returning to the market, funding remains one of the biggest challenges for developers. A key question many are asking is whether traditional bank funding or non-bank (private) lending is the better option for their next project.
The answer, as always, depends on the project, risk profile, and timing.
Bank Funding: Lower Cost, Higher Barriers
Banks continue to offer the lowest interest rates in the market, making them attractive for developers with strong balance sheets and low-risk projects. In 2026, banks are typically offering:
Lower interest rates compared to non-banks
Longer loan terms and clearer exit expectations
Greater certainty for large-scale, low-risk developments
However, bank funding comes with strict criteria. Loan-to-value ratios (LVRs) are conservative, pre-sales requirements are often mandatory, and developers must demonstrate a proven track record. Banks also take a more cautious approach to feasibility, cost overruns, and market risk.
Approval timeframes can be slow, and any change in the project — such as build cost increases or delays — can result in funding being reassessed or even withdrawn.
Best suited for:
Established developers, low-risk residential projects, and developments with strong pre-sales and equity positions.
Non-Bank Funding: Speed and Flexibility
Non-bank lenders, including private and specialist finance providers, have become a core part of the development funding market. While interest rates are higher, they offer flexibility that banks often cannot.
In 2026, non-bank funding typically provides:
Higher LVRs
Faster approvals and drawdowns
More flexible views on pre-sales and project structure
Willingness to fund smaller or complex developments
The trade-off is cost. Interest rates and fees are higher, and loan terms are usually shorter. However, for many developers, the ability to get a project started quickly can outweigh the additional cost.
Non-bank lenders often focus more on the project’s viability and exit strategy rather than strict policy rules. This makes them particularly attractive for townhouse developments, infill projects, or developers still building their track record.
Best suited for:
Small-to-medium developers, projects needing speed, complex sites, or developments that don’t meet bank criteria.
Choosing the Right Option in 2026
In practice, many developers now use a blended funding strategy — starting with non-bank funding to acquire land or begin construction, then refinancing to bank funding once pre-sales are secured or risk reduces.
The key is understanding:
Your equity position
The risk profile of the project
Timeframes and holding costs
Exit and refinance options
There is no one-size-fits-all answer. In 2026, both bank and non-bank lenders play an important role in the development ecosystem. The right funding choice can significantly impact project profitability and stress levels.
Working with experienced advisors who understand both lending markets can help developers structure funding that supports growth, manages risk, and maximises returns — without unnecessary delays.