Construction Loans

An overview of the types and the process

“Every client is different, as is every project.” “A & D” is an industry term for one specific category of commercial construction lending, but essentially all others will incorporate at least some element(s) of “acquisition and development” as well. There are far too many individual circumstances or variables to address here, but Capella Mortgage can provide the experience, expertise and efficiency to find “customized” solutions for any viable enterprise in need of funding. More importantly, the overwhelming number of alternatives and the otherwise complex nature of construction loans require seasoned professionals to navigate the maze and provide no-nonsense information.

“Land Development Loans” may be the most accurate description for a project wherein funding will be used for the purchase of raw (unimproved) acreage. Whether the plan is to simply create sub-parcels or make the entire property “construction ready” for resale, the scope of the project will most-often include, at a minimum, the basic costs of surveying , grading, permitting, (access to or installation of) utilities and drainage. Added investment, larger loans, may yield higher value and ROI.

“Interim Construction Loans” are self-explanatory. Absent an endgame objective, there’s no reason to read any further. When the job has been completed, the loan is retired. Whether the project is a high-rise hotel, strip mall, restaurant or factory, these funding vehicles are structured to serve as relatively short-term (usually two or three years) means by which to pay for construction costs: labor, materials, overhead and ancillary expenses.

“Mini Perm Loans” can be the bridge between development or interim financing and operational funding. When original financing is due to be settled and the project will be producing income upon completion of the physical plant (or implementing marketing campaigns, hiring staff or “opening for business”), these “mini perms” can supplement cash flow for up to the first five years or so.

“Takeout Loans” are often required by lenders prior to extending shorter-tem financing. These may be the simplest to explain and comprehend. Think “mortgage”, as on a home … amortized monthly payments for a fixed term of, potentially, decades. Caveat: “Zero Coupon Mortgages” fall into this category and may or may not be an appropriate vehicle to a given application. Balloon payments of principal and interest, due at maturity, require planning, discipline and a grasp of reality leading up to the inevitable settlement date.

So, with this foundation and brief overview of some loan types, the next logical question is, “How do we get the money?”

Well, the first step is to be realistic. As multi-faceted mortgage brokers, Capella Mortgage has multiple resources among national lenders and investors. We do provide uniquely superior standards of ease, flexibility, expert financial and legal advice throughout the pre-application and subsequent processes, until closing.

We advise and guide our clients long before they sign their loan application. No matter how many and varied our lenders and investors are, they will all share fundamental requirements in minimizing their risks. Be prepared to provide documented records of production, management & financial performance, as well as equity or collateral.

Once the correct paperwork is submitted for your loan request, Capella Mortgage (as brokers) can shop the same information among multiple resources or among our private investors. Unlike applying with a local bank or other lender, the same paperwork can be submitted to dozens of competitive alternatives, however that isn’t the way we do it. We know, because of years of experience, exactly which lender will be most likely to give you the loan you are requesting. And if the 1st lender can’t do the loan, we always have a backup lender.

Our home offices are in Las Vegas and many “special-clients-with-special circumstances” around the country have labeled us magicians. But neither Siegfried & Roy, nor Penn & Teller, are on our staff.

If the proposal or application is not backed with sufficient information and documentation and proof that the debt can be serviced in full and on time, we have no rabbits in our hat.