For some projects a site development loan is the first step of multi phase financing that will be required to complete the project.
Each phase typically will require a distinctly different loan with specific draw requirements and an assessment of fair market value at each step of project completion.
For other projects, the property owner or developer is only performing site development work and will sell off landscaped and serviced lots to other builders and developers.
In the latter case, the actual site development for a large project can have multiple phases and can run for a number of years.
When this is the case, its going to be important to clearly identify the period of time funds are going to be required and exactly how the cash flow from the sale of units is going to be handled with the lender.
For instance, during the site development of a given phase or stage of the project, will the borrower or property owner be able to service debt on a monthly basis or will cost of capital need to be capitalized into the lot?
When site developed lots are sold, what is the borrower’s expectation as to how much of the proceeds will need to be applied to the outstanding balance versus retained by the borrower?
And when multiple site development phases are involved, does the borrower have a well laid out and defined cash flow that shows the flow of money coming in and out to the lender during the construction period?
Each site development project, especially for larger projects with multiple phases, will require a customized site development loan facility that meets the unique requirements of the project.
Therefore, its going to be key to make sure that the borrower / lender match is appropriate so that the project can advance as expected without having any cash flow issues during any of the work to be performed.
This is where the expertise of an experienced construction mortgage broker comes in to not only get the borrower focused in on the most relevant sources of site development financing quickly, but to also help make sure that the terms and conditions of funding are going to meet the requirements of the project and project owner(s).