Construction Loans - Capital Funding Plan Proposals

Commercial real estate construction loans can be acquired quite readily as there are multiple markets for the origination and funding for most construction loans.  The key players in the construction loan industry are:

• Commercial banks.  Commercial banks dominate the commercial real estate lending market by virtue of their depth of market coverage, but they are at the bottom of the pile because they don't provide equity financing.  Banks routinely provide the lowest loan-to-value ratio in the market, but seek to offset this tremendous liability by providing a very competitive interest rate.  In addition, the commercial bank will require a very high (comparatively speaking) amount of collateral for the loan (150% to 350%).  This reduces the development program to whatever the bank decides it is going to be because the bank controls your assets, controls your cash flow and controls your future growth.

• Institutional private placements.  Private placements make up a very large chunk of the construction financing market.  Lending is not typically done on a personal recourse basis and the collateral is typically limited to the project assets and accounts.  Institutional placements can take untold months to complete and you have to carry the project (finance & carrying costs) for the entire period.

• Hedge funds, REITs and venture capital firms.  These firms are specialists in a given area of construction financing and their terms are typically pricier than the institutional private placement route or the commercial bank route.  In most cases personal recourse is required as condition precedent to underwriting the loan request.

• Government supported loans.  These include direct lending programs offered at the local, state and/or federal level with the federal government being the single biggest player pursuant to statutory acts.  There are multiple titles that need to be considered and the processing time can (in some cases) be way too long to give them serious consideration unless they are treated as the lender of last resort (a position the federal government routinely assumes to support an industry or geographical area).

In almost every case, you can utilize a structured finance approach to "layer" the various financing pieces into your project's capital funding plan.  This means it is probably time you talked to a Rainmaker Marketing Corporation consultant and learned which alternative may be best for your particular project.  Rainmaker Marketing Corporation can provide you with the due diligence documentation and consulting to support the capital funding cycle requirements and increase your financial investment leverage.

Finally, have you considered financing your commercial real estate development project using the syndication route?  A fractional ownership (tenants-in-common) plan may provide financing as early as the pre-construction phase.  The minimum syndication is for $2.5 million in at-risk, equity financing that can continue to sell until your project is fully sold out, the development loan is retired and you have eliminated foreclosure risk and bankruptcy risk from your transaction.  Click here and learn more about fractional tenants-in-common syndication programs.