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Construction Loans


Community banks are often faced with construction loans yet, many do not have a designated real estate department to manage these requests. As result lenders apply the same underwriting standards for consumer and commercial loans to construction loans.

The problem with this approach is that Construction Lending is a highly specialized form of lending requiring a different approach. It is actually Asset-Based Lending whereby funds advanced to construct a building or home should not exceed the amount of work completed. Since many problems can occur during construction, thus leaving lenders highly exposed understanding the risks in this type of lending is paramount for bankers.

This course is designed to provide fundamental and proven techniques to minimize these risks.

The target borrowers of this Construction Lending course are:

  • Individuals constructing their single-family residences (Owner/Occupant)
  • Developers who transform raw land into build-able lots
  • Builders of 1-4 family residences

We will examine the characteristics and risks inherent with these borrowers and how to underwrite them and the real estate project under construction.

Specifically, the course will cover the following topics:

  • Prerequisites for Successful Construction Lending
  • Analyzing and Underwriting the Owner/Occupant
  • Analyzing and Underwriting the Builder/Developer
  • Structuring the Construction Loan
  • Managing Construction Loan Advances
  • Financing Land Acquisition and Land Development
  • Construction Lending Documentation
  • Problem Areas in Construction Lending

The primary focus of the course will be on financing the construction of single-family residential housing.


After taking this course, the participant will:

  • Understand how to analyze the financial statements of a typical Residential Builder and the Owner/ Occupant
  • Understand the documentation requirements to manage a construction project

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