We Are Here to Help You Prevent These Three Common Construction Lending Risks

We Are Here to Help You Prevent These Three Common Construction Lending Risks

No construction lender intentionally takes on needless risk, yet risk is accepted all too often. We work with numerous clients at ECL Software, both those who have had great success and others who have faced adversity. Today, we’ll go over three of the most important things a construction lending firm can learn to reduce risk.

Failure to complete the job within the Interim Construction Agreement’s terms

The truth is that if the budget is correctly handled, funding should not run out before the project is finished. That said, if the budget is not adequately handled, something similar can occur. This is one of the features of our fund management software: it provides you with fast snapshots so you always know where your budget stands.

Failure to complete the project during the interim construction time can be dangerous for everyone involved, but there are measures to minimize the risk. Calculating and managing construction loan holdbacks, for example. Never give contractors more money than they need based on the proportion of work they’ve performed. Finally, there is no replacement for double-checking the building process.

Failure to include a contingency in your budget

You might easily go over budget if you don’t have a particular budget for contingencies, such as an unforeseen expenditure like the price of supplies doubling overnight, causing the project to be delayed. Other concerns may arise, such as the requirement for repairs to comply with health and safety regulations.

It’s worth noting that FHA 203(k) and Fannie Mae HomeStyle renovation loans require you to set aside 10-15% of the repair cost for contingencies. A project might go over budget for a variety of reasons, but it does not have to be the end of the world if a contingency budget is in place.

Ignorance of progress reports

There’s no way about it: commercial lenders have a lot on their plates, and knowing the status of each work on a daily basis would be difficult. This does not, however, imply that you may go months without learning about your development. It is simple to remain up to date with JIDO and other products offered from ECL Software.

You have complete control over who has access to your projects and what information they have access to. It takes only a few minutes for people engaged to update their progress on a daily basis, but it guarantees that those who need to know get the information they require.

Allow us to demonstrate more during a free demo

Do you want to learn more about how our cutting-edge software tools can help your business minimize risk and boost profits? Then call ECL Software at 800-625-5972 to schedule a free demonstration. We’ll guide you through it step by step and teach you how to tailor our goods to match your specific requirements.