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Private Construction Lending Bypass Lengthy Approval Process of Banks

Certain real estate projects have a need for speed: a bridge loan to complete construction, or a loan to fix and flip a distressed property. Further, if these properties are in hot markets where multiple offers might be an issue, a borrower or developer could be left out if financing isn’t immediately available.

Enter the private construction lender.

Private construction lenders connect investors who lend money with borrowers or developers based largely on using the property as collateral. They are often considered an alternative for those seeking short-term financing.

Loan Criteria Differs From Traditional Lenders

Traditional banks are not always a perfect fit, as they require a lengthy approval process and strict adherence to an approval process often based on regulatory constraints. As such, borrowers and developers have found themselves at a loss when requiring financing in time-sensitive situations. Private construction lenders operate under their own individual loan criteria, which serve to shorten the length of time needed to get a loan funded. In general, such lenders consider project merit and the borrower’s background.

The Project’s Merit

Because private construction lenders have years of experience working with investors, borrowers, developers, lawyers, government and others involved in real estate transactions in a local market, they are in a stronger position to assess the value of a project and the viability of a sale to pay off the loan before the maturity date.

The Borrower’s Background

Private construction lenders are more likely to rely on a borrower’s experience with similar real estate projects and less on credit scores and income history. Such lenders have the freedom to overlook the more traditional criteria in the loan approval process, and are an attractive option for borrowers with spotty credit. Instead, private construction lenders are primarily concerned with the amount of equity the borrower has invested in the property that will be used as collateral.

Flexibility Means Faster Turnarounds

With such flexibility and freedom, loans issued via a private construction lender are often approved in one week—sometimes within the same day. This shortened time span can be crucial to the success of a project. As a further advantage, a private construction lender like Builders Capital will work with the borrower after closing on servicing the loan, including ordering inspections. This additional layer reduces the time and headaches that can otherwise accompany the loan process, as the borrower or developer need not waste time on administrative tasks and can focus on project completion—and a speedy exit.