Structuring Construction Loan Deals That Actually Close

Construction loans are high-stakes. There’s more paperwork, more risk, and more ways a deal can fall apart. But for the right project — and the right borrower — they’re essential.

This guide, part of Janover Pro's commercial loan product overviews, focuses on helping you as a broker get construction deals packaged, placed, and closed.

What Is a Construction Loan?

Construction loans provide capital to build new commercial properties or make major improvements to existing ones. They’re riskier than permanent loans for lenders (because the asset doesn’t exist yet), and so they require far more ongoing oversight.

Instead of getting all the money at once, borrowers receive funding in stages based on progress. That means the lender is actively involved through the entire construction phase.

Key distinctions:

• Short-term: Typically 12 to 36 months
• Floating rate: Often based on SOFR or Prime + a spread
• Interest-only: Paid on funds disbursed, not the full loan amount
• Future funding: Funds are released as construction milestones are met

When Construction Loans Make Sense

Use construction loans when:

• Building ground-up commercial or multifamily projects
• Completing a major repositioning or redevelopment
• You need to finance land, hard costs, soft costs, and sometimes interest reserves

Typical borrowers include:

• Experienced developers with past completions
• Investors working with reputable general contractors (GCs)
• Owner-users building new space for their business

Importantly, construction financing is generally not a fit for first-time developers or projects without real cost controls.

What Lenders Want to See

To underwrite a construction loan, the lender has to believe the project can be completed on time, on budget, and without surprises. That means they’ll dig into every assumption — and want proof to back it up.

• Borrower experience: Have they done this before — successfully?
• Full budget: Hard and soft costs broken out, plus contingency
• Contractor credentials: Who is the GC? Are they licensed and bonded?
• Plans, permits, schedule: Lenders don’t fund ideas — they fund projects with concrete plans and timelines
• Exit strategy: Will there be a refinance, sale, or agency takeout?

Pro tip: Have the sources and uses dialed in early. Lenders will absolutely stress test it.

What Brokers Often Miss

1. No clear budget

You can’t just say "$10 million" — lenders want itemized, third-party-supported figures. A GC bid or cost estimator is a hard requirement.

2. Weak sponsorship

If the borrower has never completed a project, most lenders won’t bite. Team experience matters.

3. Soft underwriting on exit

Don’t assume a permanent lender will refi the deal. Show real NOI projections, lease-up timelines, or signed LOIs.

4. Missing permits and entitlements

If approvals aren’t in hand, your deal isn’t ready yet. Lenders won’t fund until the project can legally move forward.

5. Timeline and draw logistics

How fast will construction move? Who’s handling inspections? Lenders want this detail up front.

What to Do If Your Borrower Isn’t 'There' Yet

Not every borrower will tick all the boxes out of the gate — especially first-time developers or small teams without a track record. That doesn’t always mean the deal’s dead. But it does mean you need to help them fill the gaps.

Here are some ways to make a borderline borrower more financeable:

• Bring in a co-GP or development partner with relevant experience
• Hire a well-known GC or third-party project manager to boost credibility
• Start smaller: Break the project into phases to reduce total loan size and risk
• Offer additional recourse or guarantees to backstop the loan
• Secure firm bids, permits, and site control early to build lender confidence

As a broker, your job isn’t just to send deals — it’s to help shape them into something lenders want to fund.

Tips to Place These Deals

• Work with a borrower who has real project experience
• Package budget, contractor info, and schedule together
• Anticipate the appraisal and cost review — they take time
• Know whether the loan will be full recourse or limited
• Target lenders who know the asset type and market

Final Word

Construction loans aren’t easy — and they shouldn’t be. There’s simply too much at stake. But when placed correctly, they can create long-term borrower relationships and meaningful wins for brokers.

Take the time to understand what the lender sees as risky, and build a package that makes those concerns go away. If you do that well, your deal is already ahead of 90% of what hits their desk.

Start strong, stay organized, and don’t bring half-baked deals — construction lenders can smell it a mile away.