CONSTRUCTION/LAND DEVELOPMENT LOANS

Who Benefits from a Construction Loan and How It Works?

Construction loans are a temporary financing solution designed for construction firms, developers, and builders to fund various stages of the construction process. Typically lasting 18-36 months, these loans cover early development, entitlements, and vertical construction once permits are secured. With a structured draw schedule, funds are released in phases to ensure contractors and subcontractors are paid on time, promoting steady progress throughout the project.

Who Should Consider a Construction Loan?

Construction loans are ideal for borrowers and developers working on projects such as:

• Multifamily housing
• Single Family homes
• Affordable housing developments
• Medical and business offices
• Industrial buildings
• Retail outlets
• Storage facilities

These loans provide the flexibility to cover a range of expenses, including:

• Payroll and operational costs
• Materials procurement
• Land acquisition
• Land development

How Do Construction Loans Work?

Unlike traditional loans that disburse the full amount at closing, construction loans release funds incrementally based on a draw schedule outlined in the loan agreement. For example:

• The first draw may cover land acquisition costs.
• Subsequent draws could be allocated for milestones such as foundation work or framing.

Before each disbursement, an inspector typically verifies the completion of the specified milestone, ensuring funds are used as intended and projects remain on track.

Key Benefits of Construction Loans

• Pay-As-You-Go Interest: Borrowers only pay interest on the funds drawn, not the total loan amount. For instance, if you have a $1 million loan but have accessed $200,000, interest is calculated on $200,000.
• Interest-Only Phase: Many lenders offer an interest-only period to ease cash flow during construction.

At SL Global, we work closely with developers and builders to tailor construction loans to their specific needs, ensuring projects are completed on time and within budget. Let us help you bring your vision to life with flexible and efficient financing.