A separate company for each development: why lenders like an SPV and how to set one up properly

Many development lenders prefer each project to sit in its own company, set up for that job alone. It’s usually called an SPV, short for special purpose vehicle. It keeps the land, building contract, loan and sales away from your trading business and other projects. Set it up before you sign for the land, so the right buyer is on the contract from the start.

Most small developers come to their first project from somewhere else: a building company, a trade business, a family business with property on the side. The instinct is to buy the site in whatever entity already exists. That can work, but it often makes the finance harder than it needs to be.

What exactly is an SPV, and why do developers use them?

An SPV is just a company, typically a new proprietary company, set up to do one project. It buys the land, signs the building contract, borrows the development finance, pays the consultants and sells the finished product. When the last lot has settled and the books are closed, the company can be wound up, or kept dormant for the next job.

A company is a legal entity separate from its owners. As business.gov.au explains, it can incur debt, sue and be sued as an entity separate from you, and its members generally aren’t liable for its debts beyond any unpaid amount on their shares. That separation is the point. A dispute in your trading business doesn’t land on the development site, and a cost blowout on the development doesn’t sink your trading business.

The same page is honest about the downsides. Companies cost more to set up and run than simpler structures, they lodge their own tax returns and pay an annual review fee, and directors can be personally liable if they breach their obligations.

Why do lenders prefer a single-purpose company?

From a development lender’s side, an SPV makes three things simpler.

Assessment. The lender can see one asset, one loan, one budget and one set of sales. There’s no trading business with its own debts, wages and contracts to untangle.

Security. The lender takes a mortgage over the site and often a security interest over the company’s other assets. With nothing else in the company, there are no other creditors competing for those assets.

Monitoring. Every dollar in and out of the company’s account relates to the project. Progress draws, consultant invoices and sales proceeds are easy to follow.

	Trading company as developer	Project SPV
What the lender assesses	The whole business plus the project	The project, plus the directors behind it
Other creditors	Suppliers, ATO, staff, other lenders	Usually none beyond the project
Risk of cross-contamination	High, both ways	Low
Setup cost and admin	None extra	A new company to register and run
Ease of winding up afterwards	Not applicable	Close once the project is complete

Our main page on construction and development finance covers the rest of what lenders look for: cost to complete, end value, presales and experience. The structure is simply the container those numbers sit in.

Does an SPV protect your personal assets?

This is where expectations and reality part ways. An SPV does keep the project separate from your other businesses and their creditors. It usually doesn’t keep the development lender away from you.

Development lenders commonly ask every director, and sometimes every shareholder, for a personal guarantee. Many also ask for security over other property, such as a director’s home or an investment property, especially where the project equity is thin. If the project fails and the sale of the site doesn’t clear the loan, the lender can call on those guarantees and that security.

So think of the SPV as a firewall between projects and businesses, not as a shield for the people behind it. That’s still worth having, and it’s why experienced developers use a new company for each job.

Weighing up how to structure your next project and what security it will need? Start a quick enquiry and tell us how you’re planning to hold it. Enquiring doesn’t involve a credit check.

How do you set up an SPV in the right order?

Timing is everything. The most common mistake is signing for the land personally or through the trading company and then trying to switch the buyer to a new company afterwards. Depending on the state and the contract, that can mean a nomination clause you didn’t include, extra duty, or a seller who won’t agree.

A cleaner sequence:

1. Get advice on the structure. Company alone, company as trustee of a trust, or a company owned by your family trust. Your accountant should look at tax on sale, GST registration and land tax before you choose.
2. Get your director IDs. ASIC’s steps to register a company say directors must apply for a director ID before the company is registered.
3. Register the company. You’ll need a name (or use the ACN), registered office and principal place of business addresses, share structure and members, and signed consents from every director and secretary. ASIC lets you reserve a name for up to two months if you need time.
4. Get an ABN, and register for GST if the project needs it. A company developing new homes for sale will normally need to look at GST from the start.
5. Open the bank account in the company’s name. Lenders will want project money flowing through it.
6. Sign the land contract in the company’s name, or with a nomination clause your lawyer has checked.
7. Line up the finance in the same name. The loan, the building contract, the insurances and the consultants’ engagements should all name the SPV.

Lenders will search ASIC’s registers to confirm the company exists, who its officeholders are and whether any director appears on the banned and disqualified list. Make sure the records are current before you apply.

Illustrative example: keeping a plumbing business out of the project

Illustrative only. A plumbing contractor with a busy commercial business wants to build four townhouses on a $1.1m site. Their first idea is to buy through the plumbing company, which has healthy turnover.

The development lender points out that the plumbing company has an equipment loan, a line of credit, 18 staff and a large ATO payment due each quarter. All of that would need assessing alongside the project, and any slow month in plumbing could look like a risk to the development.

The owner sets up a new company with their spouse as directors, registers it for GST and signs the land contract in its name. The lender funds the land and the build through the SPV, with personal guarantees from both directors and a second mortgage over an investment unit for extra security. The plumbing business stays untouched, keeps its own facilities, and even quotes for the townhouse plumbing at arm’s length.

What else should you think about before setting up an SPV?

• Who signs what. Every contract, guarantee and loan document needs the right signatories. Lenders check company signing rules carefully.
• Related-party dealings. If your building or trade business works on the project, keep contracts and invoices at arm’s length. Lenders and their surveyors will look closely at related-party pricing.
• Funding the equity. The SPV needs money in before the lender lends. That often comes from directors as loans or share capital, sometimes funded by a home equity business loan over property they already own.
• Winding up. Plan how profits come out and how the company will be closed or kept for the next project.

If the developer is a builder doing a spec project, our guide on spec home finance for builders covers what changes when the contractor and the owner are effectively the same people. And if you’re deciding whether to use property as security for the equity, our secured or unsecured tool is a quick way to compare.

New company, new project: let’s see what it can borrow

Setting up a clean SPV is a sign of a developer who takes the project seriously, and lenders notice. If you need help funding the equity going into the company, a site deposit, or a top-up for the build, we can look at property-secured options from $20k to $5m over residential or commercial security, for business purposes.

Start with a short online enquiry; it’s a one-minute job and there’s no credit check when you first get in touch. We don’t hand your details to a pile of lenders, and nobody will cold-call you on our behalf. A real person reads about your project and structure and calls you directly. Please be accurate about who owns what and any debts already in place, so we can match you with the right option on the first try.

See if your development company qualifies →