How to Talk Like a Pro About CRE Construction Loans (Even If You’ve Never Done One Before)

A CRE Construction Loan is just a Permanent Loan with a Bridge Loan twist—simple as that. You underwrite it like a standard owner-occupied CRE deal, just with a few added steps.

If a client, prospect, or referral source asks you about construction financing, be ready to step up and sound like a closer. Even if you haven’t done one before, this quick guide will give you everything you need to inspire confidence and win the deal.

Step 1: Ask These Questions—Earn Instant Credibility

Your credit team will pepper you with questions. Beat them to it by getting these answers up front:

• Have you done ground-up construction before?
• Picked a general contractor yet?
• Own the land—or in escrow to buy it?
• Any red tape (entitlement issues) that could cause delays?
• Got a full construction budget?
• Are plans and permits ready to go?
• Estimated start and finish dates?
• Will the market support the new property—rents, value, etc.?

Pro tip: Knock these out early, and you’re already ahead of the pack.

Step 2: Start Collecting Docs—Like a Deal Closer

Treat this like a regular CRE loan, but stack on a few extras:

• ✅ Construction Plans
• ✅ Permits
• ✅ Budget
• ✅ Contractor Info + Financials
• ✅ Any Existing Appraisal or Environmental Reports

The sooner you collect them, the faster your deal moves.

Step 3: Understand the Underwriting Game

You don’t need to be a credit wizard—but you do need to talk the talk:

1. Dual Loan Structure:
   • Bridge Loan funds construction (interest-only, 12–18 months).
   • Perm Loan (SBA 504, 7(a), or Conventional) pays it off after CO.
2. LTV Rules Change During Construction:
   • SBA 504 gives 90% LTV on perm side.
   • Your bank might want 80% LTV during construction.
3. Reserves Are a Must:
   • Interest reserve = pays the loan during build.
   • Construction reserve = risk buffer.
4. Perm Loan Appraisal:
   • Based on completed value, not current dirt.
5. Environmental:
   • Phase I required, minimum.
6. Using SBA 504?
   • Get your CDC involved early.

Step 4: Construction Phase – You Step Back, the Bank Steps In

Once the build starts, your role shifts to project confidence while your team handles the details.

• Monitoring:
  Bank or third party verifies progress (client pays for this).
• Draw Requests:
  Contractor gets paid as work is done. Credit signs off, funds get released.

Step 5: Construction Complete – Time to Close Like a Pro

Wrap it up and roll into permanent financing:

1. Certificate of Occupancy Issued
   – All liens cleared, green light given.
2. Sign the Perm Loan Docs
   – Borrower locks in long-term financing.
3. Bridge Loan Gets Paid Off
   – Smooth handoff. Deal closed. Time to move on to the next.

Bottom Line:
Construction loans may look intimidating, but they’re not rocket science. Know the steps. Ask the right questions. Speak with confidence. You’ve got this.

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