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How Do Banking Regulations Affect Construction Lending?

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How Do Banking Regulations Affect Construction Lending?

More red tape is the latest sign that the the aftershock of the 2008 financial crisis are still being felt. In early 2015, new regulations for commercial real estate investing took effect for most banks. The regulation requires banks with over a half billion dollars in assets, as well as all savings and loans to set aside more capital against certain construction and development loans.

And because banks have to set aside more reserves, their pricing for construction loans has increased. Increased documentation requirements also make it more difficult and costly for banks to make a construction loans. The bottom line: banks are going to have to charge a higher rate. Consequently, the terms banks are offering on construction and development loans are tightening. Banks are also less likely than before to loan to newer firms with less history.

As banks pull back from some construction lending, other lenders are filling the gaps.

First Monument Funding Financial recently closed on a $1.8 million loan for a 16-acre development site in Colchester, situated in southeastern Connecticut’s New London County.

“The site is currently cleared for development of 67 units totaling nearly 162,000 square feet,” said Jiran. “That includes 43 townhouse units, 20 live/work units, and four apartments. Well-located sites with approvals in place are an important part of any local economy, and we are pleased to be able to provide the necessary financing,” announced Mark Jiran, President and CEO of the Gilroy, CA-based direct private lender.

First Monument Funding Financial, LLC, one of the largest direct private lenders in the country, specializes in bridge loans for commercial property and land acquisition. The principals of the company have closed more than $4 billion in loans to date. And time can be on your side. The firm’s creative financing expertise enables the closing of equity-based loans of up to a 75% loan-to-value ratio, from $50,000.00 to more than $100 million, in as little as five to seven business days, including just two days for commitment and just days to subsequently close.

“Cutting through red tape takes the experience of a broker and a lawyer who specializes in these sort of deals,” adds Jiran. It’s just another hurdle to get over but shouldn’t keep a good deal from crossing the finish line,” Jiran says.

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