Here is how commercial construction loans are underwritten. The first test is the profit test. Will your finished project be worth more than it will cost to construct? Most lenders will require at least a 20% profit margin.
A related test is the loan-to-value ratio. After the project is completed and, say, your strip center is occupied, will the construction loan be less than, say, 75% - 80% loan-to-value.
Commercial construction lenders often will not…
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