Commercial Construction Financing

Construction financing is disbursed in stages called draws, tied to verified completion milestones. A typical project might have 4 to 8 draws corresponding to stages like foundation, framing, mechanical, and finishing. Before each draw, the lender sends an inspector or quantity surveyor to confirm the work has been completed to the specified stage. Funds are then released, usually within a few business days of inspection approval. This protects both the borrower and the lender throughout the build.

Construction financing typically covers both hard costs and soft costs. Hard costs include materials, labour, excavation, concrete, framing, mechanical and electrical systems, and finishing. Soft costs include architectural and engineering fees, permit and development charges, legal fees, appraisals, project management, and interest carry during construction. The exact breakdown depends on the lender, but most of our construction lending partners finance 65% to 80% of total project costs.

Lenders generally require a detailed project budget and cost breakdown, construction timeline, building permits or evidence of permit application, architectural and engineering drawings, a Phase I environmental site assessment, an appraisal or feasibility study showing the projected completed value, and your development resume or track record. We help organize and present these materials in the format lenders expect to see.

It is possible, though the options will be more limited. Most institutional construction lenders prefer borrowers with a demonstrated track record. For first-time developers, we recommend partnering with an experienced project manager or general contractor, which strengthens the application considerably. We also work with private construction lenders who place more weight on the project merits and equity contribution than on borrower experience.

Construction loans are short-term by design and must be replaced with permanent financing upon project completion. This is called a takeout mortgage. We typically arrange the takeout commitment alongside the construction loan so you have certainty about your long-term financing before breaking ground. This dual-commitment approach protects you from market shifts and gives construction lenders additional confidence in the deal.