Construction Financing

Commercial Construction Loans

Construction loans fund ground-up development and major renovation projects for commercial real estate. These short-term facilities typically feature 12 to 36-month terms with interest-only payments during the build period, funded through progressive draws as construction milestones are met. Lenders include banks, debt funds, and specialized construction lenders.

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Overview

Ground-Up Construction & Renovation Financing

Construction financing is inherently higher risk than permanent lending, which means lender selection and deal structuring are critical. Experienced borrowers with strong track records can access competitive bank construction loans, while more complex or speculative projects may require debt fund capital. Key considerations include loan-to-cost ratios, interest reserves, completion guarantees, and the exit strategy — whether that's a permanent loan take-out, sale, or refinance.

Lender Sources

Banks
Debt Funds
Private Lenders
Credit Unions
CDFI Lenders

Ideal For

Ground-up apartment developments
Industrial warehouse construction
Build-to-suit retail and office
Hotel development and rehabilitation
Fix-and-flip residential projects
Major property renovations and repositioning

Track Record

Construction Loans Transactions

A selection of construction loans we have closed across the country.

Construction

$60,000,000

125-Unit Ground Up

Seattle, WA

Ground-up construction financing for a 125-unit luxury apartment development in Seattle's booming residential market.

Construction

$43,900,000

Single Tenant Net Lease

Fairfield, CA

Build-to-suit construction for a national credit tenant in Fairfield, combining development returns with investment-grade lease security.

Construction

$43,400,000

Single Tenant Net Lease

Inglewood, CA

Major build-to-suit construction near SoFi Stadium in Inglewood, one of LA's most dynamic development corridors.

Construction

$28,500,000

Industrial Distribution

Las Vegas, NV

Ground-up construction financing for a Class A distribution center in the Las Vegas industrial market, targeting the surge of e-commerce and last-mile logistics operators drawn by Nevada's no state income tax, rapid population growth, and proximity to the Southern California consumer base.

Construction

$18,750,000

250,000 SF Ground Up

Sacramento, CA

Ground-up construction of a 250,000 SF industrial warehouse in Sacramento's expanding logistics and distribution market.

Construction

$18,000,000

55-Unit Ground Up

Orange County, CA

55-unit multifamily ground-up construction in Orange County, targeting high demand for new Class A rental product.

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FAQ

Construction Loans FAQ

Commercial construction loans are short-term facilities (12-36 months) that fund the development of new buildings or major renovations. The loan is drawn in stages as construction milestones are completed, with interest-only payments during the build period. Upon completion, the borrower refinances into permanent financing or sells the property.

Construction loans typically offer 65-80% of total project cost (loan-to-cost or LTC), depending on the lender, borrower experience, and project type. The remaining 20-35% must come from borrower equity, though mezzanine or preferred equity can fill part of the gap.

Most lenders require borrowers to demonstrate relevant development experience for construction loans. First-time developers may need to partner with an experienced co-sponsor or general contractor, or work with private lenders who are more flexible on experience requirements.

Construction loan rates typically range from 6.79% to 13.04%, depending on the lender type and project risk profile. Bank construction loans for experienced developers are at the lower end, while debt fund and private lender rates are higher but offer more flexibility.

A construction-to-permanent loan (or mini-perm) combines construction financing with a built-in permanent loan conversion upon project completion. This eliminates the need to refinance separately, saving time and closing costs, though terms may be less competitive than standalone permanent financing.

Construction loan draws are released based on completed work verified by an independent inspector. The borrower submits draw requests with supporting documentation, the lender's inspector verifies the work, and funds are released (typically within 5-10 business days). An interest reserve is usually built into the loan to cover debt service during construction.

Commercial Construction Loans

Construction Loans at a Glance

Ground-Up Construction & Renovation Financing

Lender Sources

Ideal For

Construction Loans Transactions

Construction Loans by City

Related Property Types

Related Insights

How Construction Loans Work: A Step-by-Step Guide for CRE Developers

Mixed-Use Development Financing: A Complete Guide

Construction Loans in Boston: What Borrowers Need to Know

Construction Loans FAQ

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