Construction Loans: What Developers Need to Know Before Breaking Ground

Construction financing is one of the most powerful tools in a developer's arsenal — and one of the most frequently misunderstood. Unlike a standard mortgage, a construction loan funds a project in stages, disbursing capital as work is completed and verified. Understanding how this works before you start is the difference between a smooth project and a costly delay.

Our construction loan program offers loan-to-cost (LTC) up to 90%, with loans available up to $10 million. Borrower income is not required — the deal is underwritten based on the project itself: the land value, the construction budget, the projected completed value, and the borrower's experience. Most states are eligible, and the program is available for investment properties only (not owner-occupied).

One of the most important metrics in construction lending is the ARV — after repair value, or in new construction, the projected completed value. Lenders typically cap the loan at 75% of ARV. This means if your completed project is worth $2 million, the maximum loan is $1.5 million. Understanding this constraint upfront helps you structure the deal correctly from the start.

Draw schedules are another area where developers get tripped up. Construction loans don't fund all at once — they release capital in draws tied to construction milestones. Each draw typically requires an inspection to verify the work is complete. Delays in inspections or disputes over completion percentages can slow your project. Work with a lender who has a clear, predictable draw process.

What makes a strong construction loan application: a detailed budget with line-item costs, a signed contract with a licensed general contractor, architectural plans and permits (or a clear timeline to obtain them), comparable sales supporting your projected completed value, and evidence of the borrower's development experience.

If you're planning a ground-up build, a major addition, or a gut renovation that requires construction financing, the time to start the conversation is before you need the money — not after you've broken ground. Submit your scenario and we'll walk through the structure with you.