Lenders, Let's Talk Shop: What Are Your Biggest Challenges in Financing New Construct

[Charlice Arnold]

As fellow lenders in the real estate space, we know how critical it is to support our clients in turning their construction projects from dreams into reality. But let’s be honest, the process isn’t always straightforward.

What’s the most common challenge you face when offering construction loans?

Let’s connect and discuss how we can collaborate or simply share knowledge to improve our industry!

[Connor Hibbs]

The biggest killers that I've found for GUC loans to qualify have been:

1. Lack of exp or no exp. There are few lenders that can work with GC's that don't have any projects where they are on title even though they have been the ones building the property. I've noticed some lenders using heavy rehab experience recently though to help qualify a borrower.

2. Lack of liquidity from the borrower. There is no way around this one.

3. Projects not hitting minimum value requirements for land. There are lots of lenders looking for a min of 50k or 75k for the purchase of the land.

4. Lack of comps can be difficult. This doesn't occur as often but has killed deals before.

The last thing isn't as much of a deal killer as it is something that doesn't get brough up often enough, especially with borrowers who are newer to GUC specifically, but the time it takes to for GUC. Too many borrowers get plans from an architect then assume that the loan will only take a month to close. These can close quick with a lender, but only if the due diligence has been done in advance. Permits, Plans, Entitlements, Drawings, Rehab Budgets form the GC, should all be done in advance prior to reaching out to the lender if a borrower wants it to close quick.