How ground-up construction loan draws work
A ground-up construction loan is not a lump sum on day one. The lender funds the project in draws as work is inspected and completed. Kelly Dutton arranges ground-up construction financing at OneClick Commercial Funding for sponsors who already have a budget, a builder, and a plan for the permanent loan.
What a draw actually is
Each draw reimburses completed work, often after an inspector confirms percent complete. You do not get the next draw because the calendar says so. A budget that front-loads soft costs and leaves the structure underfunded will stall in the middle of the job.
Interest during construction is usually held in an interest reserve inside the loan, not paid from your operating account each month. If the project runs long, the reserve can run out. That is a sponsor problem, not a surprise the lender will absorb.
The takeout has to exist before you break ground
Construction lenders want to know who pays them off. That takeout might be a permanent commercial loan, a sale, or a bridge. “We will figure out the permanent loan later” is not a structure. If the finished building will be apartments, the takeout conversation looks like a multifamily DSCR loan. If it will be a hotel, it looks like hotel financing.
Budget, contingency, and sponsor cash
Lenders read the GMP or stipulated-sum contract, the sources and uses, and the contingency line. A contingency of zero tells them the budget is a wish. Sponsor liquidity matters because change orders happen. The U.S. Census construction spending series is a national backdrop. Your contractor’s bid is the number that gets underwritten.
Owner-occupied projects sometimes fit an SBA loan instead of a conventional construction facility. Say that on the first call so Kelly does not package the file for the wrong desk. The SBA 504 program is built around owner-occupied real estate and major fixed assets, and it is slower than a single-bank close.
What this is not
This is not a commitment to lend. Loan terms, amounts, and rates are not guaranteed. Every file still goes through lender approval, credit review, and underwriting.
About the author
Kelly Dutton is a senior commercial mortgage broker at OneClick Commercial Funding in Phoenix. She arranges financing for business owners and real estate investors. She is a broker, not a lender. Read more on the About Kelly Dutton page.
Next step
Call (480) 363-1412 or visit kelly-dutton.com to request a financing call with Kelly Dutton at OneClick Commercial Funding.