issues relating to construction lending and the construction industry n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Issues Relating to Construction Lending and the Construction Industry PowerPoint Presentation
Download Presentation
Issues Relating to Construction Lending and the Construction Industry

Loading in 2 Seconds...

play fullscreen
1 / 7

Issues Relating to Construction Lending and the Construction Industry - PowerPoint PPT Presentation


  • 422 Views
  • Uploaded on

Issues Relating to Construction Lending and the Construction Industry. Construction- Start to Finish- seek lender involvement early during the approval process and shortly after receipt of approvals.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Issues Relating to Construction Lending and the Construction Industry' - Rita


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
issues relating to construction lending and the construction industry
Issues Relating to Construction Lending and the Construction Industry
  • Construction- Start to Finish- seek lender involvement early during the approval process and shortly after receipt of approvals.
  • Permanent Financing- allow 60-90 days (or more) from meeting to closing. Appraisal, Environmental reports and title work need a few weeks lead time.
  • Any Government sponsored involvement such as the EDA or SBA should be coordinated through your lender
  • Appraisals-more conservative
  • Lending criteria post sub prime debacle
lending to contractors specialized field
Lending to Contractors- Specialized Field
  • Some Lenders will not entertain lending to this specialized field.
  • Lending to some specialties and not others.
choosing a bank
Choosing a Bank
  • Questions to ASK!
    • What is your legal lending limit?
    • What is your ‘hold’ or limit?
  • Prohibition on certain industries or groups. i.e. road building contractors, bridge or dam builders etc.
  • What is the approval process? Is it a signature process or committee process? Usually driven by the loan amount.
loan structure
Loan Structure
  • Collateral- business assets, lien on real estate.
  • Cash Flow- debt service coverage.
  • Conditions
  • Capacity- ability to service the debt. Previous history and proforma cash flow.
  • Character- most important in some lenders eyes.
specialized criteria for lending to contractors
Specialized Criteria for Lending to Contractors
  • Stricter covenant criteria.
  • A/R to A/P ratio: Minimum: 1.5X--Like to see: 2.0X to 2.5X
  • Debt to Worth: Minimum: 2.0X—Like to see: 1.5X to 2.0X
  • Current Ratio Minimum: 1.0—Like to see: 1.20 to 1.0 or better
  • Cash to Total Assets: Like to see: 5% to 7%
  • EBIT/Interest Expense: Like to see: 3.0X to 8.0X
financial reporting
Financial Reporting:
  • An accurate and timely reporting of financial information is crucial to a successful borrowing relationship.
reporting for working capital lines of credit
Reporting for Working Capital Lines of Credit:
  • FYE- audited are preferred for credits in excess of $5 million.
  • Reviewed FYE with disclosures. Within 120 days of FYE.
  • Semi Annual Statements- compiled or reviewed with disclosures. Can be negotiated.
  • Quarterly financial statements – company or mgmt prepared.
  • A/R and A/P agings- quarterly.
  • Contract Status Report – quarterly.