Financing a commercial real estate development is like building a house of cards: If one card falls, the deal collapses.

From analyzing the target market to having enough money to cover cost overruns, it is a complex balancing act that many would-be developers fail to master.

“The development business is tough,” said George Smith, president of mortgage banking firm George Smith Partners Inc. “You have to deal with entitlements, cost estimates, architectural designs, pre-leases and anchor tenants. People underestimate how tough it is.”

And despite a strong local economy, getting the money for a new project is harder today that it once was. Lax lending policies of the ’80s resulted in a staggering amount of bad real estate loans, meaning lenders now ask tough questions before they hand over the cash.

First, they want to know if the developer has a good track record. More than the project itself, it’s the experience of the developers that often signals whether the project will be completed on schedule and within budget.

“Our philosophy is, first people, then credit, then real estate,” said Tim Washburn, executive vice president of the Wells Fargo Real Estate Group. “We’ve been in this market for 25 years and I can tell you that it is the people who make the difference when times get tough.”

Lenders also want developers to put some of their own money into projects, preferably 10 percent or 20 percent of total costs. Such an equity stake not only lowers the amount the lender has to put up, but acts as an incentive for the developer to get the project completed under cost.

One of the factors that contributed to the decision by DreamWorks SKG to pull out of Playa Vista was the contention by lenders that the studio wasn’t willing to put enough of its own money into the deal.

Lenders also are more likely to finance a project if the developer can show that additional money that can be put into the project at a later date in case of cost overruns or delays.

“We want to see if they have deep enough pockets,” said Smith. “So if something goes wrong they can put good money after good money.”

Once comfortable with the developer, lenders want proof that the target market can support the new real estate development. In the case of office property, lenders must be shown that rental rates are likely to increase in the coming years, thus enabling the developer to pay off its loan.

As for retail development, lenders are looking to see how much competition the project will receive from other retail outlets.

“The real estate market is going through continually changing cycles,” said Tom Jirovsky, senior vice president at Kosmont & Associates Inc. “So the developer needs to spend a lot of money on research.”

Many lenders require that the developer already have at least 50 percent of its project pre-leased before any money will be loaned. That’s a change from the ’80s, when some projects were developed without any pre-leases.

In May, MaguirePartners put on hold a 750,000-square-foot, 12-story office tower in Glendale after it was unable to pre-lease any space. “It’s rather difficult to get financing when there’s no specific tenant in hand,” Tim Walker, a partner in the firm, said at the time.

The lender also will want to hear whether the developer has lined up an anchor tenant for the project, as well as the financial strength of that tenant. “We would much rather see Pacific Bell as an anchor tenant than some Internet start-up,” said Washburn.

All these calculations are conducted to answer two questions: Will the developer make enough money off the project to pay off his loan? Or, if the developer defaults, leaving the project in the control of lenders, would they be able to resell the property at a profit?

Even if the developer has a great track record and a winning cost analysis, its financing plans can be scuttled by external factors.

Last September, development activity ground to a temporary halt after convulsions in the world financial markets sent a chill through the commercial mortgage-backed securities market. Many lenders use that market to resell commercial real estate loans to investors. But with the market at a standstill, lenders reduced the amount of real estate loans they were willing to make.

The spigot of loans is now open again, though at slightly higher interest rates.

Even if a developer manages to line up the money, there is no guarantee it will be cutting the ribbon on its new office building any time soon. Protests from local residents or civic groups against a development can delay construction, incurring added interest costs on loans.