When seeking finance for a development project, most developers focus on terms like interest rate, loan size or lender appetite. But before any of these details are considered, one thing must come first—feasibility.
In the world of property development finance, feasibility is the foundation of the funding decision. It is the evidence lenders use to decide whether a project is viable, fundable and worthy of progressing to credit approval.
If the numbers do not stack up—or if the risks are not addressed—funding will be delayed, reduced or declined, no matter how attractive the project may appear. For property developers, sponsors and investors, understanding feasibility from a lender’s perspective is essential to preparing a successful finance submission.
At Aberdeen Capital, we help development clients prepare lender-ready feasibility models and risk frameworks that support confident decision-making and credit committee alignment. This article outlines what lenders look for in a feasibility assessment and how to improve your position before applying for funding.
What Feasibility Means in Property Development Finance
In development terms, feasibility refers to the financial and commercial modelling used to assess whether a project will generate a sufficient return relative to its risks and costs. Developers often produce feasibility studies to support internal investment decisions or pitch to investors.
Lenders, however, view feasibility through a different lens. Their focus is not only return on investment, but risk mitigation, downside protection, and repayment certainty. A project might be profitable on paper, but unless the feasibility meets lender expectations—across cost control, market validation and risk buffers—it may not be considered fundable.
For lenders, feasibility answers key questions:
- Are the development costs realistic and fully captured
- Are the projected revenues supported by data
- Is there enough equity to absorb delays or changes
- What happens if the market shifts or costs increase
To learn how lender finance models differ from developer assumptions, visit our Property Development Finance page.
Key Financial Inputs Lenders Assess
A well-prepared feasibility model is the backbone of the lender submission. It must be more than a high-level summary. Credit analysts will request detailed financial evidence, including line-by-line costings, revenue assumptions and equity inputs. Here are the main areas lenders review.
Total Development Cost
Lenders want a full breakdown of land acquisition, construction, professional fees, contingency allowances, marketing and interest costs. Any omissions or underestimations signal risk. Construction costs must reflect builder quotes, tender packages or independent estimates.
Forecast Revenue and Sales Assumptions
Revenue projections must be supported by comparable sales, market reports or pre-sale data. Lenders typically apply their own discount or absorption rates, particularly in uncertain market conditions. Overstated revenues or unrealistic pricing reduce lender confidence.
Equity Contribution and Buffers
Lenders assess how much equity the developer is contributing. The more equity committed, the lower the lender risk. Lenders also expect to see contingency buffers within the feasibility to account for potential overruns or delays.
Sensitivity and Downside Testing
Feasibility models that include downside scenarios show foresight. Lenders want to see what happens to profitability and repayment if construction costs rise, sales are delayed or prices fall. Sensitivity testing demonstrates preparedness and reduces perceived risk.
Commercial and Market Factors
Feasibility is not just about numbers. The commercial context of the project significantly influences the credit decision. Lenders assess the market strength behind the model and the assumptions driving revenue timing.
Location and Market Demand
Lenders evaluate local area trends, supply and demand dynamics, and demographic shifts. A project in a growth corridor with strong demand fundamentals is more attractive than one in an oversupplied or volatile market. Location due diligence is critical.
Pre-Sales or Leasing Commitments
Pre-sales improve lender confidence by demonstrating market acceptance and helping de-risk revenue. Some lenders require minimum pre-sale thresholds before funding is approved. For commercial or mixed-use projects, pre-leases and tenant expressions of interest play a similar role.
Timing and Absorption Risk
Feasibility must reflect realistic timeframes for construction, sales and settlements. Lenders assess how long it will take for revenue to be realised and what risks could delay absorption. Staging assumptions must be commercially supported.
Risk and Downside Assessment
Even the best feasibility model can be rejected if it does not address key risks. Lenders need evidence that the sponsor understands the downside risks and has controls in place to mitigate them.
Cost Overruns
Cost increases can erode profitability and stretch loan limits. Lenders look for strong cost control mechanisms including fixed-price construction contracts, builder due diligence and contingency buffers within the feasibility.
Delays and Construction Risk
Project delays can affect interest costs, pre-sale expiry and buyer confidence. Feasibility timelines must include realistic lead times, allowance for approvals and weather delays. Experienced builders, transparent procurement processes and progress reporting all improve risk perception.
Exit Risk
Exit risk refers to the ability to repay the loan from sales or refinance. Weak pre-sale levels, low buyer demand or limited secondary funding options all increase exit risk. Lenders will question how repayment will occur if the project takes longer to sell or market conditions shift.
To improve your risk positioning, Aberdeen Capital’s Risk Management Consultants assist clients with feasibility stress testing and credit risk readiness.
How Feasibility Impacts Funding Structure
The quality and credibility of the feasibility model directly influences the funding structure offered. Weak or unsupported models may result in reduced loan amounts, tighter covenants or additional conditions.
Loan Size and Gearing
Lenders calculate maximum loan size based on feasibility outputs. This includes Loan to Cost ratios and Loan to Value ratios. Strong feasibility with reliable revenue and tight cost control may support higher gearing. Riskier models may lead to lower loan limits.
Pricing and Covenant Terms
Riskier projects often attract higher pricing to reflect lender exposure. Likewise, lenders may impose stricter covenants if feasibility buffers are thin or project complexity is high. Clear feasibility can support better pricing and more flexible loan conditions.
Conditions Precedent to Drawdown
Feasibility gaps or unresolved risks may lead lenders to add pre-funding conditions such as increased equity injection, minimum pre-sales or updated valuations. Working with specialist advisors can help reduce these requirements.
At Aberdeen Capital, our Capital Management Solutions ensure the funding structure supports both feasibility outcomes and long-term project strategy.
Why Specialist Advisors Improve Approval Outcomes
Experienced advisors bring a lender perspective to feasibility review and funding preparation. By addressing potential concerns before submission, they reduce delays and improve the chance of approval.
Independent Feasibility Review
Advisors test feasibility assumptions, validate inputs and model downside cases to ensure the project can withstand lender scrutiny. This includes stress testing, funding capacity analysis and equity modelling.
Lender-Aligned Presentation
Feasibility is not just a spreadsheet. Advisors help translate the model into a clear, lender-facing narrative that outlines the project rationale, risks and mitigants in language lenders understand.
Early Risk Identification
Advisors spot issues that may trigger concern during credit review—such as missing cost items, overestimated revenues or unrealistic timelines. Addressing these before submission positions the project for a smoother approval.
To see the team behind this expertise, visit Our Team for an overview of our advisory capability.
How Aberdeen Capital Supports Feasibility-Led Funding
Aberdeen Capital works with property developers and sponsors to align project feasibility with lender expectations. Our goal is to strengthen your funding position through rigorous planning, structured engagement and strategic guidance.
Structuring Advice
We assess capital structure, debt equity mix, and contingency requirements to ensure the proposed funding is appropriate and achievable. This includes preparing funding models that support both lender and sponsor needs.
Lender Preparation and Packaging
We prepare supporting documentation, coordinate with third-party consultants and manage pre-submission lender queries to ensure the feasibility is presented clearly and confidently.
Credit Positioning
We assist with credit committee engagement by addressing risks upfront, building detailed repayment plans and presenting feasibility in a form that improves approval confidence.
If your project is moving toward funding, speak to a development finance advisor at Aberdeen Capital to ensure your feasibility meets lender expectations.
Frequently Asked Questions
What is feasibility in property development finance?
It is the financial and commercial assessment lenders use to determine whether a project can be funded based on its cost, revenue, risk and repayment strategy.
Do lenders use the developer’s feasibility model?
They review it but apply their own assumptions, adjustments and stress tests to assess downside risk and repayment security.
How much equity affects feasibility approval?
The more equity contributed, the stronger the feasibility appears. Equity helps absorb cost overruns, supports contingency planning and demonstrates developer commitment.
Can feasibility issues delay funding approval?
Yes. Incomplete or unrealistic feasibility models often lead to extended due diligence, reduced loan amounts or rejection by credit committees.
Can Aberdeen Capital help with feasibility preparation?
Yes. Aberdeen Capital provides feasibility testing, risk advisory and property development finance services that improve lender confidence and funding outcomes.
