From the course: Structuring a Construction Loan
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High level considerations
From the course: Structuring a Construction Loan
High level considerations
- [Instructor] In this course, we are going to shift our focus to the numbers aspect. This course will be a lot more quantitative than construction fundamentals. At a high level, there are four buckets that are important considerations for the developer and also the lender. First, how much can the lender get on a loan-to-cost or LTC basis? We will spend a good deal of time on this question in particular, including the timing of funding and the concept of eligible and ineligible costs that feed the LTC calculation. Second, how much is the loan going to cost? Fees and interest rate tell the developer the cost of their construction loan. Is the interest fixed or floating? Is interest expense cash pay or does it accrue? How about interest reserve? Where does that come in? Third, there are more qualitative considerations that a developer needs to consider as well, when evaluating the overall loan package on offer from a lender. This would include covenants, guarantees, recourse or…
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