Construction Financing Tradeoffs

“Do You Know How to Approach Construction Financing Trade Offs When The Funding Commitment(s) in Hand Are Not Perfect?”

Ok, so you’re working through a number of potential construction financing options. Because you have a strong project and ownership group, there are likely going to be several good options available.

But what happens when the commitments you start to get back don’t quite match up with what you’re asking for?

First of all, welcome to the world of construction financing, especially when you’re working with institutional lenders.

Regardless of how competitive the market is, every lender is going to have their quirks, conditions, and requirements, some of which are not going to line up with your ideal view of a potential construction financing deal.

So what do you do?

Do you go back to the market and try to come up with a better option?  If an option is better on paper is it going to be easier or harder to manage and if its the latter, what are the costs associated with harder?

Do you try to negotiate better terms through playing one offer against another?

From my point of view, the perfect deal is a myth. There are always going to be trade offs so you might as well get used to it.

Second, trade offs are about getting to an acceptable level of collective terms and conditions that you can live with. If you have more time to work with, you can try to land a better deal. But if a better deal is not in the offering in the time you have to work with, there is no guarantee that the deal you had to work with will still be there in the future either.

A bird in the hand …

As we continue to try and understand where banks and other institutional lenders are heading as we move through the back end of the current recession in 2010, current thinking is that any financing proposal that is close to what you require and is something you can live with is one you should take and run with.

Every deal these days is hard to find and harder to close. While every lender may be telling you they want to fund your deal, each one of them has also tightened up their criteria making the process much more difficult to complete.

In the words of an unnamed author, …perfect is too late.

Click Here To Speak Directly With Construction Mortgage Broker Joe Walsh