After the 2008 financial meltdown, securing a construction loan was a difficult process. Today, the market has settled and some construction lenders are now aggressively placing capital with well positioned new construction and development projects.

Construction loans are known as “story loans”. Lenders need to know what the project’s story is—mainly, the reasons for the development and how the construction itself is planned. These details factor into what financing products can be recommended. For example, loan options and rates differ greatly for borrowers who are interested in building a custom home on land they own, and borrowers who are looking to develop a retail center in the city. Banks and investors typically specialize in either Residential, Office, Retail, Industrial, or Apartment/Multifamily.

Developers must have a reasonable equity position—usually a minimum of 20%— prior to construction lenders providing a commitment letter. They must also be financially fit with a strong resumé of past projects. On large projects, we have secured construction loans as far out as 60 months. These are case-by-case and predicated upon the borrower or investor’s strength and the feasibility of the project. Typically, construction loans are 18-24 months and are provided with interim funding and, on occasion, via a lender appointed construction fund manager.

Location and site use are important to securing construction financing, and loan amounts may vary depending on the project. Construction loans are available on “make sense” projects at attractive locations with strong borrower financials. For example, construction lenders tend to favor highly populated, affluent areas like New York, Houston, and Los Angeles more than smaller or economically depressed metropolitan areas.

Construction financing can be arranged for projects that fit the area. Lenders will perform a GAP analysis to define market demand and absorption rates. This will assist in determining saleability, or, if held, stabilized revenues.

In addition to Financial Institutions, FHA, and HUD, Cent Banc has relationships with aggressive Wall Street Hedge Funds and Hard Money Lenders and can secure fast funding. We can offer HUD construction loans up to 90% LTV (loan-to-value). Keep in mind that if the project has a tight timeline or are concerned about future market conditions, this loan may not be for you or your firm.