Adrenaline’s Post

Excellent article by one of our resident experts, Justin Zeimetz. Very much worth a read if you are interested in building commercially at any level in 2024.

It is important to understand that these challenges do not indicate the company has no options. While traditional lenders have stringent requirements, most small and mid-sized construction companies are funded by alternative lenders who are used to working with construction companies and understand the cyclical behavior of the business. Alternative lenders offer the same financing products as banks, including SBA financing, bridging the gap in the business lending landscape. #construction #businessfinancing #businesslending #constructionfinancing

I read an article that says the world of commercial construction lending is going through some big changes. Factors like slowed growth rates, increased capital costs, and tighter credit conditions are changing the landscape. Banks are closely monitoring portfolios, and non-bank lenders are gaining ground. I wonder what this means for the average investor.

If you're in construction, you don't need to be told that despite being a significant part of our economy, the construction industry still faces many challenges in qualifying and obtaining loans, especially through traditional lenders such as banks. While banks' guardrails around loans are high and narrow for all industries, construction seems to have just another fiery hoop to leap through, especially if not a large corporation with solid deposits, enjoying high profits for the last 3+ tax years and sufficient collateral. What is behind the hesitation to offer financing to construction companies and what can you do? Here are several reasons why lenders are cautious about extending financing: Increased Risk: Construction projects are considered higher risk by lenders due to their long-term nature and potential for budget overruns. Economic Volatility: The nature of the construction industry means that lenders may hesitate to provide loans during economic downturns when stability is a concern. Limited Collateral: With limited tangible assets available as collateral, construction companies may find it challenging to secure loans from traditional lenders like banks. Alternative lenders typically do not require collateral. Revenue Fluctuations: Larger upfront payments without immediate returns or consistent revenue flow look like a cash flow issue to the lender, making lenders cautious about repayment capabilities. Not Enough Profits: Unless a large company, most are not consistently making a certain amount in profits every year, even if their revenues are sufficient to meet their operating expenses, payroll and other business needs. Regulatory Complexities: Construction projects are subject to numerous regulations and permits which may derail the project. Always explore different lender options as the requirements are different between lenders. #Construction #Financing #BusinessChallenges

Attention all banks with concentrations in construction lending! Regulators are focusing on a particular issue regarding construction loan portfolios. Our team, led by Guy LeBlanc, is already working on an interesting project for one of our bank clients in the southwest who has one of the largest construction concentration ratios in the country. Watch this unedited video to see what the issue is and what we did about it. To learn more, please reach out to me. #banking #constructionlending #regulations

Construction funding - are you trying to get funding for your construction project the same old way: borrowing from a bank or lender? There is an easier way. You do NOT need to spend money on appraisals, feasibility studies or other third-party reports that banks/lenders require to determine if your project is a low enough risk for them to lend on. You do NOT have to worry about DSCR (debt service coverage ratio), occupancy percentage, enough pre-sales, or any of the other typical benchmarks that lenders/banks require you to meet so they feel comfortable that you will be able to make the monthly interest/principal payments. You also do NOT need to have the typical 20-30% equity into the project that most banks/lenders require. You do need to have at least $250,000 cash available and a business plan or executive summary of your project. 10M is the recommended minimum construction project total cost. This is NOT a trade program and funding is provided lump sum (up to a certain amount), which is NEVER how banks/lenders fund construction projects. This does NOT require monthly inspection reports to be provided to the bank/lender to have a requested draw released. Contact us for more information and let Reign Capital and Consulting help you structure your contraction project funding. #constructionloans #constructionfinance #projectfinance

Construction funding - are you trying to get funding for your construction project the same old way: borrowing from a bank or lender? There is an easier way. You do NOT need to spend money on appraisals, feasibility studies or other third-party reports that banks/lenders require to determine if your project is a low enough risk for them to lend on. You do NOT have to worry about DSCR (debt service coverage ratio), occupancy percentage, enough pre-sales, or any of the other typical benchmarks that lenders/banks require you to meet so they feel comfortable that you will be able to make the monthly interest/principal payments. You also do NOT need to have the typical 20-30% equity into the project that most banks/lenders require. You do need to have at least $250,000 cash available and a business plan or executive summary of your project. 10M is the recommended minimum construction project total cost. This is NOT a trade program and funding is provided lump sum (up to a certain amount), which is NEVER how banks/lenders fund construction projects. This does NOT require monthly inspection reports to be provided to the bank/lender to have a requested draw released. Contact us for more information and let Reign Capital and Consulting help you structure your contraction project funding. #constructionloans #constructionfinance #projectfinance

Impact on Different Loan Types: The severity of the impact depends on the type of loan used. Fixed-rate loans provide some temporary protection, but eventually will need to be refinanced at the prevailing higher rates. Floating-rate loans see the impact more immediately as interest rates fluctuate. However, it's not all negative. Rising interest rates can also: Reduce Building Material Costs: By slowing down construction activity, there could be less demand for building materials, potentially leading to price stabilization or even a decrease. Increase Focus on Efficiency: In a tighter financial environment, contractors may be more incentivized to find ways to improve efficiency and reduce overall project costs. Overall, rising interest rates pose a challenge for construction financing, potentially leading to higher costs, project delays, and a slowdown in new projects. However, it can also push the industry towards more cost-effective practices and potentially lead to lower building material prices. #inflation #buisnessstrategy #projectmanagement #financing #riskmanagement #projectcontrol #buisnessmodel #budgets #fad #bankruptcyq #economics #financialcrises

In this month’s Portfolio Construction, we provide a review of the Bank of Canada’s rate changes and insights on what to expect in 2024. https://lnkd.in/g4uxsheT

5 Year GOC below 4.0% It's a welcome relief to see rates coming down, with market sentiment shifting that the rate hikes are likely over. The potential of conventional debt at 6% or lower, should help to spur some non-apartment investment sales. Also some of CMHC approvals out in the market with 4.5% or lower ceiling rates, will begin to look more palatable when they are projects completing construction in the next 12-18 months. We are seeing lenders becoming more flexible accepting lower ceiling rates on construction projects, as their own economist forecasts are pointing in this direction. Nevertheless, rates / hikes are going to continue to be data dependent, and if we have learned anything, we are in a very volatile environment where an unexpected report could move things in either direction.