Construction - Commercial

The Fannie Mae construction-to-permanent program provides experienced multifamily developers with agency permanent financing locked at origination — eliminating the refinance risk that accompanies conventional construction lending. One lender, one closing, and a defined permanent loan structure from day one.

Fannie Mae's program accommodates multifamily, mixed-use with a residential component, and student housing projects near qualifying campuses. Properties must be in major metropolitan markets or urban infill locations with strong long-term demand fundamentals. The sponsor must have a demonstrated track record in the asset class — Fannie underwrites operator experience as a primary risk variable alongside the project financials.

The construction phase runs interest-only with funded monthly draws. Upon completion and achievement of stabilized occupancy, the loan converts to permanent Fannie Mae debt with non-recourse execution and standard carve-outs. Early rate lock options are available, which is a meaningful tool in a volatile rate environment.

For developers who want the certainty of agency permanent debt without the execution risk of a two-step process, this is the most direct path.

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Insurance company construction-to-permanent financing is available on a selective basis for institutional-quality projects in primary markets. The defining characteristic of this program is the permanent financing lock — the insurance company commits to the permanent loan at origination, eliminating refinance risk and providing a single closing for the full project lifecycle.

Eligible projects are Class A multifamily or credit pre-leased commercial properties — retail, industrial, mixed-use, and hospitality in select cases. Credit pre-leasing is a meaningful underwriting variable for commercial projects: a significant portion of the space leased to investment-grade tenants before construction begins materially reduces the lender's stabilization risk and improves program availability.

The construction phase runs up to two years interest-only with loan-to-cost in the 60%–70% range. Completion and stabilization guarantors must demonstrate adequate financial strength — this program is not available to undercapitalized sponsors regardless of project quality. Closing timelines range from 30 to 120 days from application approval.

This is the right program for experienced developers with institutional-quality projects, strong pre-leasing, and sponsor balance sheets that can support the guaranty requirements.

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Debt fund construction financing is the right capital source for projects that don't meet agency or insurance company eligibility requirements — sponsors without an institutional track record, projects in secondary markets outside agency footprints, asset types that agency programs don't cover, or timelines that don't accommodate a full institutional underwriting process.

This program covers ground-up construction, acquisition and horizontal development, and NNN development across multifamily, mixed-use, retail, industrial, hospitality, student housing, and self-storage. Loan amounts run from $15M to $100M with leverage up to 75% LTV and LTC. The construction phase is interest-only and both recourse and non-recourse structures are available depending on the sponsor profile and project characteristics.

Private capital construction lenders underwrite to the project, the market, and the exit — not the trailing income that doesn't yet exist. The standard exit is a refinance into permanent agency, CMBS, or life company debt once the project stabilizes and qualifies. For sponsors who are building toward an institutional permanent loan, debt fund construction capital is the bridge that gets them there.

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Hard money and bridge construction lending exists for one reason: speed and flexibility when institutional capital isn't available or isn't fast enough. This is the capital source for sponsors who need to break ground on a timeline that conventional lenders can't match, projects with complexity that disqualifies them from institutional programs, or situations where the sponsor profile doesn't yet meet agency or debt fund requirements.

Loan amounts are smaller than institutional construction programs — typically $2M to $20M — which makes this program well-suited for smaller multifamily projects, mixed-use developments, retail build-outs, and light industrial construction. Rates are higher than institutional alternatives, reflecting the speed and flexibility of execution.

The underwriting focus is straightforward: asset value, exit strategy, and sponsor skin in the game. A clear path to permanent financing — whether that's a sale, a conventional refinance, or an agency takeout — is the primary underwriting variable alongside collateral coverage.

This is not a long-term hold program. It is a tool to get a project built and stabilized so it qualifies for permanent institutional financing. Borrowers who use it effectively treat it as a short bridge to a better permanent capital structure.

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The SBA 504 program is the most efficient construction financing structure for owner-operators who want to build rather than acquire their own commercial facility. The three-party structure applies to construction in the same way it applies to acquisition — bank financing up to 50% of project cost, CDC financing up to 40%, and borrower equity covering the balance — resulting in a lower equity requirement than conventional construction lending.

This program is specifically for owner-occupants. The borrower must be an operating business that will occupy at least 51% of the completed facility. Eligible project types include retail, industrial, mixed-use with owner-occupied commercial space, and self-storage. Hospitality is eligible as a special-use property with the additional 5% equity requirement.

The CDC portion carries a fixed rate for the full term — up to 25 years for real estate — which locks in long-term financing cost from the construction phase forward. That rate certainty is a meaningful advantage for owner-operators who are planning for long-term occupancy rather than a near-term sale or refinance.

Completion timelines and construction draw management follow standard SBA procedures. The bank portion of the construction loan converts to the permanent first mortgage at certificate of occupancy, and the CDC debenture is issued at that point as well.

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