Commercial Development Lending – Overview Bridge Capital works with brokers and borrowers seeking financing for construction projects and for the rehabilitation of existing structures. Most property types are eligible candidates: multi-family, commercial and mixed-use properties. Because all multi-family and commercial development projects are unique, all construction and rehab loans are “story loans”. The lender has to know the story behind the development before the loan can be approved. The challenge then is how to best present the project in a clear fashion so the lender and the borrower benefit. There are common features to all construction loans: typically construction loans require interest only payments during construction and become due on completion. The primary difference between a construction loan and a regular mortgage loan is that the lender will be approving your loan in reliance with the proposed improvements as planned. To ensure this the lender will inspect the progress of the project when you request a disbursement of construction funds. Funds are disbursed when the lender verifies that the work is completed. Each release of funds is a “disbursement” or a “draw”. Another variable in construction lending is how much of the project cost the lender is willing to lend. If you already own the land then you already have a considerable equity contribution. More often, time will have past between the purchase of the site and the actual approval and the closing of the construction loan. This period can be considerable and somewhat costly. Prior to this date you may have incurred expenses for an architect, an engineer, various reports, fees to planning department, and others before the building permit will be issued. These costs are referred to as “Soft Costs” that will be discussed later. This approval and permitting process generally adds considerable value to your land and improves your equity contribution. Depending upon the amount of equity (and cash investment) you have into the project, as well as the future value of the property, you may be able to receive reimbursement for some or all of these soft costs from loan funds. Developers are encouraged to keep copies of all documentation relating to these payments.