Construction Loans
Demystified. Simple. Streamlined constructions loans for your growing business.
What to expect when financing a commercial construction project:
The construction loan application process requires information about the partners, the project, and the feasibility of the development. Security's bankers will sit down and work with you to understand the plans and goals. Typical information provided will be:
- Current tax returns and financial statements
- Feasibility, project details and proforma financial plans
- Construction budget
- Management capability and/or construction partners to complete the construction
Once reviewed, our bankers will make a decision on providing a non-binding term sheet for the project. Once the non-binding term sheet has been reviewed, negotiated, and accepted, Security will move forward with a full underwriting and approval of the proposed loan.
Types of Projects
As relationship lenders, our borrowers lead the way. We've financed construction projects for many different types of uses:
- Owner occupied industrial, retail and office buildings
- Investor owned industrial, retail and office buildings
- Downtown Minneapolis and St. Paul office redevelopments
- Multifamily apartment buildings
- Condo buildings
- Mixed use buildings
- Single family suburban developments
In every project, Security will work to find the right solution for your needs. This involves listening to your plans and understanding the unique challenges and opportunities. Rest assured, we are in it for the long haul so we are approaching our proposal not only to win your business on the immediate transaction but also the next.
Construction loan terms
A construction loan is set up as a straight line of credit or also called a draw line of credit. The line of credit amount is fixed and re-advances are not allowed. Upon review of the project and successful interest, Security will provide a nonbinding term sheet. So what can a borrower expect to see?
- Straight line of credit
- Interest only payments for a period of 12 to 18 months depending on complexity and size of project
- Potential for conversion to a mini-perm loan that requires principal and interest payments
- Origination, title perfection and documentation costs to cover underwriting and documentation of the loan
- Draw fees for processing monthly draw requests due to both the selected title company and bank
- Third party inspection fees to monitor progress of construction. Fees will depend on the size and complexity of the project
- Appraisals for pre and post construction completion. Also referred to "As is" and "As completed" appraisals
As every deal is different, there are many other terms that may or may not be applicable to a specific project but this gives a high level outline to understand what to expect. Security uses its experience and creativity to make sure that its term sheets are both reliable and transparent so you can focus executing on your development plans and sales activities.
