From single-family homes to multi-unit developments, our construction loans provide the capital you need to build from the ground up.
Construction loans provide the capital necessary to finance ground-up building projects, covering costs from foundation work through final finishes. Unlike purchase loans that fund acquisition of existing properties, construction financing supports the transformation of raw land or redevelopment sites into finished buildings ready for sale or occupancy. These loans require specialized structures that accommodate the unique cash flow patterns of construction, funds are released gradually as work progresses rather than in a single disbursement, and lenders must have expertise in evaluating construction budgets, monitoring progress, and managing the risks inherent in building projects.
The construction lending landscape has changed significantly in recent years, with many traditional banks reducing or eliminating their construction loan programs due to regulatory complexity and risk aversion. This has created a financing gap for builders and developers, particularly those working on speculative projects without pre-sold buyers or those with non-standard construction types that don't fit conventional lending boxes. Hard money construction loans fill this gap by providing experienced builders with capital based on project feasibility, builder qualifications, and property collateral rather than rigid underwriting criteria that disqualify many viable projects.
Arizona's strong population growth and housing demand create ongoing opportunities for construction across the Phoenix metropolitan area and beyond. From single-family spec homes in suburban communities to multi-family developments near employment centers, from custom homes on individual lots to commercial buildings serving growing businesses, construction activity remains robust. Hard money construction loans serve diverse project types, offering flexibility that accommodates different building methods, materials, and timelines while providing the reliable capital builders need to complete projects on schedule and within budget.
Service Applications
Single-family spec home construction represents a core application for hard money construction loans. Builders purchase finished lots in desirable neighborhoods, construct homes based on market demand and buyer preferences, and sell the completed properties to owner-occupants. Hard money financing covers lot acquisition (if not already owned) and all construction costs, with interest-only payments during the building period. This structure allows builders to preserve working capital for multiple concurrent projects rather than tying up cash in any single home.
Multi-family construction projects, including duplexes, fourplexes, and small apartment buildings, benefit from hard money financing particularly when developers plan to hold and rent rather than sell immediately. These projects generate rental income upon completion but require significant capital during construction. Hard money loans can fund both construction and a short-term stabilization period, after which developers can refinance into permanent rental property financing. This bridge-to-permanent structure maximizes leverage during the riskiest phase of the project.
Custom home construction for individual homeowners or pre-sold buyers sometimes requires hard money financing when the project doesn't fit conventional lending parameters. Examples include unique architectural designs, owner-builder situations, construction on rural land, or homes with non-standard features that automated underwriting systems reject. Hard money lenders evaluate these projects individually based on builder experience, construction plans, and property value rather than checking boxes on standard criteria lists.
Commercial construction including office buildings, retail centers, industrial facilities, and mixed-use developments often requires hard money financing due to project complexity, pre-leasing requirements, or sponsor experience factors. These loans can fund ground-up construction, major renovations of existing structures, or tenant improvement projects for commercial spaces. The loan structures typically include interest reserves, lease-up periods, and terms that accommodate the longer timelines and capital requirements of commercial projects.
Renovation and major remodeling projects that effectively constitute reconstruction, gut renovations, additions that double square footage, or conversions of buildings to new uses, are often funded through construction loans rather than renovation loans. These projects involve similar risks and funding patterns to new construction, with staged disbursements tied to inspection milestones. Hard money construction loans accommodate extensive projects that transform existing structures into substantially new properties.
Common Challenges
Builders seeking construction financing face the fundamental challenge that traditional lenders have largely exited the market or imposed such restrictive criteria that few projects qualify. Banks typically require presold buyers, substantial builder equity, extensive documentation, and proven track records even for experienced builders. This leaves many qualified builders unable to access the capital needed to grow their businesses or undertake profitable projects.
Cash flow management during construction creates unique challenges that construction loans must address. Builders incur costs continuously, materials, labor, permits, utilities, but revenue arrives only upon sale or lease-up of the finished project. Without proper loan structure including interest reserves and realistic draw schedules, builders can face cash shortfalls that delay projects, damage subcontractor relationships, and jeopardize completion. Traditional construction loans often underestimate these needs or impose rigid structures that don't match actual construction patterns.
Cost overruns and unforeseen conditions are common in construction, requiring contingency reserves and flexibility in loan structures. Material price volatility, weather delays, subcontractor issues, or discovery of site conditions can increase costs beyond original budgets. Rigid loan structures that don't accommodate reasonable overruns force builders to seek expensive supplemental financing or risk project failure. Experienced construction lenders understand these realities and structure loans with appropriate contingencies.
Our Approach
Our construction lending process begins with a comprehensive project review. We examine your construction plans and specifications, detailed budget including contingencies, construction timeline with realistic milestones, and builder qualifications including license status, insurance, and track record. We also assess the property location, market demand for the planned product, and your exit strategy, whether presold, speculative sale, or rental hold.
We structure loans that support successful project completion. This typically includes interest reserves covering payments during construction so you're not paying loan costs out of pocket while also funding construction, draw schedules aligned with actual cash flow needs, and contingency reserves for unexpected costs. We work with experienced construction inspectors who verify progress before each draw, protecting both you and us while ensuring funds flow when needed.
Our draw process is designed for efficiency. Submit your draw request with invoices and photos showing completed work, we order an inspection, and funds are typically released within 3-5 business days of inspection approval. We don't charge inspection fees for standard draws, and we understand that construction schedules depend on timely funding. For experienced builders with strong track records, we can streamline the process further with simplified documentation requirements.
Phoenix Market
The Phoenix area offers abundant opportunities for new construction across all sectors. Suburban communities in the Southeast Valley, West Valley, and North Phoenix continue to expand with single-family home development, while infill sites in central Phoenix, Tempe, and Scottsdale support higher-density projects. Commercial construction follows employment growth, with office and industrial development concentrated near major transportation corridors and the airport. The region's strong population growth, business-friendly environment, and relatively affordable land costs compared to coastal markets support continued construction activity.
How much can I borrow for a construction project?
Construction loan amounts typically cover 80-90% of construction costs plus land value if you already own the lot, or 75-85% of total project cost (land plus construction) if we're financing the land acquisition as well. The exact leverage depends on your experience, project type, location, and exit strategy. First-time builders should expect lower leverage (70-75%) until they establish a track record. We evaluate each project individually and can discuss specific numbers once we review your plans and budget.
What builder qualifications do you require?
We prefer to work with licensed general contractors who have completed similar projects successfully. Required qualifications include a valid Arizona contractor's license, general liability and workers compensation insurance, and a track record of completing projects on time and within budget. For experienced builders, we streamline the approval process. For newer builders, we may require larger contingency reserves, more frequent inspections, or a cosigner with construction experience. We evaluate each situation based on project complexity and your demonstrated capabilities.
How does the construction draw process work?
Funds are released in stages as construction progresses. Typical draw schedule points include foundation completion, framing/rough-in, drywall, and final completion. To request a draw, submit invoices for work completed, photos showing progress, and any required lien releases. We order an inspection to verify completion, and funds are released within 3-5 business days of approval. The first draw may require additional documentation including permits and proof of insurance. We hold back a retainage percentage (usually 10%) until final completion to ensure punch list items are addressed.
Do you finance the land purchase as part of the construction loan?
Yes, we can structure loans that include both land acquisition and construction costs, or we can provide standalone construction financing if you already own the lot. Including land in the loan is common for builders who have identified a buildable lot but haven't purchased it yet. The loan typically closes on the land acquisition, with construction funds held in escrow and released through the draw process. For loans including land, we generally cap leverage at 75-80% of total project cost to ensure you maintain meaningful equity in the deal.
What happens if my construction costs exceed the budget?
Cost overruns are common in construction, which is why we require contingency reserves, typically 5-10% of hard costs, in every construction loan. If overruns exceed the contingency, you would need to cover the additional costs from your own funds. We recommend realistic budgeting with appropriate contingencies, and we review budgets carefully during underwriting to identify potential issues. If market conditions change dramatically or unforeseen conditions arise, we can discuss loan modification options, though these would involve additional fees and possibly adjusted terms.
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