Not all loans and loan processes are the same. Securing
commercial real estate loans is different from securing
construction loans. If you are seeking a construction loan, here is
some information to help you understand the lender's
mindset.
Securing unfinished collateral
While lenders secure regular commercial loans with existing cash
flow, they secure construction loans with unfinished collateral.
The collateral's value depends on the appraised land value, the
project's completion and its estimated economic viability. It
is natural for lenders to seek assurances that a developer will
manage construction risk from the project's start. They also
want to ensure that developers have enough money invested in the
venture to overcome construction problems and complete the project
successfully.
