Non-Recourse Construction Loans, Lending, Investing, Fundings & Financings...
Prior to the advent of Internet-based programs, non-recourse construction loans were - by and large - the province of the federal government that provided tax-exempt bond financing and mortgage loan insurance for certain types of commercial income-producing properties and lines of business. Today, non-recourse construction loans can be obtained by increasing the amount of at-risk equity contributions to the transaction - the sufficiency of which provides enough financial incentive for a lender to provide non-recourse construction financing and you make this work by having Rainmaker perform an underwriting review of your proposal and help you with our participating network of brokers, bankers and/or funding groups to place your financing or create a syndicate to provide the necessary capital for your development project. This means the capital financing is done in layers that are represented by individual phases of financings as the project progresses through the pre-construction phase and becomes a stronger and stronger candidate for financing based upon the due diligence completed and available at each on of these phases of financing. This has the impact of reducing the prime construction mortgage loan's loan-to-value ratio and it can reach a point where the lender eliminates recourse (except for standard carve-outs).
Increasing the equity capitalization is just one of the solutions for obtaining non-recourse construction loans. In fact, there are a basket of transaction terms and strategies that can be employed to induce a lender to make the construction loan on a non-recourse basis, including:
Ultimately, these items are used in combination to make the transaction attractive to the lender. In many cases, the reduction in the origination fees (created by the reduction in the origination amount of the loan) can be waived and the points increased the same dollar amount as if the higher loan-to-cost ratio had been used.
Before you stroke that check, you had better answer the following questions honestly:
If you honestly answered no to any of these questions, then you have an issue and you should very seriously consider having Rainmaker resolve it for you before you go any further on your capital hunt as your odds of success will not be great. Abject failure and frustration will be your only likely outcome. Remember, 4 out of 5 proposals never obtain capital funding.
Rainmaker offers you the opportunity to work with a consulting firm that understands the totality of the underwriting process, the current capital market conditions and how your particular project, market and financial situation fits into this complex matrix in order to create a capital funding plan that has higher odds of garnering a successful outcome than what you could otherwise contrive on your own. Furthermore, Rainmaker plays the key role of being the lead consultant who understands the market, finance and business model aspects of your project better than anyone else on the project team and then utilize that understanding to provide answers to the underwriters (hopefully, on the spot) and get them the information they need in order to make a positive investment decision that can result in you getting the financing you ultimately need to make the project work.
Talk with us. Rainmaker offers a complete array of capital financing consulting solutions designed for today's commercial income-producing property developer.