Commercial Loans Blog

How Commercial Construction Loans Are Underwritten

Posted by George Blackburne on Tue, Jun 21, 2016

commercial_construction-2.jpgI just completed a new training article on how commercial construction loans are underwritten.  It was the hardest subject that I have ever attempted because bankers use five different financial ratios when underwriting commercial construction loans.  The article took me two weeks to write.




If you are involved in commercial real estate construction, development, sales or finance, you will greatly benefit from mastering this subject.  The Loan-to-Cost Ratio, Total Construction Costs, Hard Costs, Soft Costs, Contingency Reserves, the Profit Ratio, and the Net-Worth-to-Loan-Size Ratio will suddenly because part of your daily lexicon.  After reading this article, commercial real estate finance will hold few remaining mysteries for you.

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And folks, this stuff is not that hard.  If you paid attention in fifth grade math, you can master this stuff.  Prepare to be wowed.  Read this great article here:


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Keep looking for the business card or the contact information of any banker making commercial real estate loans.  We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders.


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Have you registered on C-Loans (filling in your name and address) and gotten your free $199 commercial mortgage underwriting manual?


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Do you sell commercial real estate?  If so, then by all means open a commercial mortgage company (a desk, a phone, and a body)!  Why?  Because there is no better way to meet high-net-worth individuals than to own a comemrcial mortgage company.  Poor people don't own $5 million shopping centers.


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Do you need a commercial loan with no prepayment penalty? Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months? Do you need a lender who will allow a negative cash flow? Do you need a lender who will also look at the borrower's global income - income from salaries, other investments, etc.? Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national? Do you need a non-recourse loan?


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Got a commercial mortgage deal that deserves a life company, conduit, or bank loan?


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Did you learn something today?  Want to recieve two free training lessons in commercial real estate finance every week?


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Topics: commercial construction loans