Construction Loans

Who would Benefit from a Construction Loan and How does it Work?

A construction loan is a temporary financing solution, typically 18-36 months, tailored for construction firms, developers, or builders. It aids in funding the construction process including early development, entitlement or going vertical once permits have been issued. Construction Loan’s draw schedules outline the payment plan for contractors and subcontractors, ensuring timely payments upon completion of their tasks and ongoing steady progress.

We collaborate extensively with borrowers and developers on a variety of ventures, including multi-family residences, affordable housing projects, medical and business offices, industrial structures, retail outlets, storage facilities, and beyond.

The funds are versatile and can be allocated for numerous purposes. Typically, they are utilized for:

• Covering payroll and routine operational costs
• Procuring materials
• Acquiring land
• Developing land

Unlike typical loans where borrowers receive the full amount upon closing, commercial construction loans disburse funds based on a draw schedule. This schedule details payment releases at specific milestones as mentioned in the loan agreement. For instance, the first draw might cover land acquisition, while a subsequent draw could be allocated once the foundational work is done. It’s common for an inspector to verify the completion of a milestone before sanctioning the next fund release.

This draw system ensures timely project completion and allows borrowers to pay interest only on the amount drawn from the loan. For instance, if you have a $1 million loan but have only accessed $200,000 so far, your interest will apply only to the $200,000. Lenders may also offer an interest-only phase for your loan..