Construction Lending Trends
In recent years, the construction lending industry has experienced some notable trends that have impacted the lending landscape. As the economy has continued to improve, demand for new construction projects has increased overall until recently. This has led to some changes in the way that construction loans are underwritten and structured. In this post, we'll take a look at some of the key trends in construction lending.
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Increased scrutiny on borrower qualifications - As construction lending has become more competitive, lenders are scrutinizing borrower qualifications more closely. This means that borrowers are now required to have stronger financials, higher credit scores, and a proven track record of successful construction projects.
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Rise of non-bank lenders - While traditional banks still dominate the construction lending market, there has been a rise in non-bank lenders in recent years. These lenders offer more flexible terms and may be more willing to lend to smaller borrowers who don't meet the strict requirements of traditional banks.
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Increased use of technology - Technology is playing a larger role in construction lending, with lenders using software and other tools to streamline the underwriting process and improve risk management. For example, lenders are using software to analyze borrower financials and cash flow projections to assess risk more accurately.
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Growing interest in alternative construction methods - As the construction industry grapples with a shortage of skilled labor, there has been growing interest in alternative construction methods such as modular construction, which can be done off-site and then assembled on-site. These methods can be faster and more cost-effective than traditional construction methods meaning less money needs to borrowed to complete a construction project.
Overall, the construction lending industry is evolving as borrowers' needs change and technology advances. By staying up-to-date on these trends, lenders can better serve their clients and remain competitive in a rapidly changing market.
