Global Capital Partners Fund is a New York City-based private commercial lender with a diverse range of loan products designed to meet client needs. Among the commercial loan offerings Global Capital Partners Fund offers is construction financing.
Construction financing carries some level of risk, as there are circumstances such as fluctuations in the market, incomplete building projects, and changing regulations, that can affect a borrower’s ability to repay a loan. To protect themselves, lenders should develop sound strategies that include evaluating every borrower to determine their risk profile. Key factors lenders look into when financing commercial projects include insurance and involvement in the project.
Multiple insurances are part of the decision-making process to approve a construction loan and they include Title Insurance and Builder’s Risk Insurance. Title Insurance seeks to protect lenders from any monetary losses as a result of defects associated with a property’s title. On the other hand, Builder’s Risk Insurance covers costs of materials, equipment, and supplies that have been acquired to be used in the construction, but haven’t been utilized yet. Lenders often scrutinize both the Title Insurance and Builder’s Risk Insurance in relation to a borrower’s risk policy before approving a loan.
As opposed to traditional loans where lenders give money and await for repayments to be made, construction financing requires the full involvement of a lender in the project. Since funds are given out in stages during the construction period, lenders should be actively involved in key processes such as the creation of transparent budgets and require draw inspections among others. Draw inspections entail a lender hiring an independent engineer or architect to supervise construction activities in order to identify any risks in good time and respond to them accordingly.
Construction financing carries some level of risk, as there are circumstances such as fluctuations in the market, incomplete building projects, and changing regulations, that can affect a borrower’s ability to repay a loan. To protect themselves, lenders should develop sound strategies that include evaluating every borrower to determine their risk profile. Key factors lenders look into when financing commercial projects include insurance and involvement in the project.
Multiple insurances are part of the decision-making process to approve a construction loan and they include Title Insurance and Builder’s Risk Insurance. Title Insurance seeks to protect lenders from any monetary losses as a result of defects associated with a property’s title. On the other hand, Builder’s Risk Insurance covers costs of materials, equipment, and supplies that have been acquired to be used in the construction, but haven’t been utilized yet. Lenders often scrutinize both the Title Insurance and Builder’s Risk Insurance in relation to a borrower’s risk policy before approving a loan.
As opposed to traditional loans where lenders give money and await for repayments to be made, construction financing requires the full involvement of a lender in the project. Since funds are given out in stages during the construction period, lenders should be actively involved in key processes such as the creation of transparent budgets and require draw inspections among others. Draw inspections entail a lender hiring an independent engineer or architect to supervise construction activities in order to identify any risks in good time and respond to them accordingly.
