Securing and administering a commercial construction loan in Texas requires strict coordination between the developer, general contractor, and lender inspecting engineer. Managing monthly draw applications and title date-downs prevents funding freezes.
Key Construction Loan Terms & Underwriting Metrics
- Loan-to-Cost (LTC) Ratios: Most regional Texas banks and commercial lenders lend between 65% and 75% of total hard and soft development costs, requiring 25% to 35% cash equity injected upfront.
- Interest Reserves: A pre-funded reserve account within the loan facility that pays monthly interest during construction before the facility generates operating revenue.
- Monthly Draw Request Process (AIA G702 / G703): Contractors bill monthly based on percentage of completion. The bank dispatches an independent third-party consulting engineer to inspect jobsite progress before releasing funds.
- Title Date-Down Endorsement: With every draw, the title company issues a date-down endorsement verifying no mechanic’s liens have attached to the property.