It’s not a given that a commercial construction loan is going to be forthcoming for any type of project you may choose to undertake. Or even if you can secure a construction loan, the rates and terms can be considerably skewed depending on the project.
Remember that for most construction lenders, the focus on their lending decision when it comes to construction loans is what the end market value for the project is likely going to be, and in unlikely event that the lender had to take over the project before completion, how hard would it be to market the project in the short term in order to reclaim the funds advanced.
At any period of time, there are projects that have stronger market demand than others. The better rates and terms, leverage, and lender choices will follow around those projects. From a builder or developer point of view, less capital will need to be invested in these projects with a higher potential profit margin due to lower cost of financing.
On the flip side, building against the current can not only result in larger down payments and a higher total cost of borrowing, it can be hard to locate a source of construction financing at all. This can delay or potentially kill a project that’s already had some money put into it.
The best solution to guard against a lack of construction financing or rates and terms you can’t live with is to start the financing process early before you spend money or enter into binding commitments. Select an experienced construction mortgage broker who can help you navigate the market and potentially introduce you to sources of construction financing you hadn’t previously thought of or were aware of. Getting a mortgage broker working for you can also allow you to focus more time on project planning versus spending all your time hunting for construction financing
The key here is to not assume that money will always be available to you, when you require it, for any and all types of projects. And even if there are lenders that can finance your project, make sure you have left yourself enough time to find them before you start incurring any type of delay costs.