Acquisition & Development

Acquisition and Development Projects are the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites. An A & D loan allows the borrower to purchase real property, put in the necessary infrastructure (streets, lighting, utilities), and then build residential or commercial buildings.

Acquisition

Private Lender: Land Acquisition

Private Lenders are a good funding source for land acquisition.   These lenders provide short term loans to purchase or refinance the property, in anticipation that they will be paid off through a construction loan or the sale of the property.  

Pros

  • Underwriting Flexibility
  • Quick Closing
  • Interest-only Payments
  • Pricing Based on Exit Strategy and LTV

Cons

  • High Interest Rate
  • Higher Fees
  • Short Term
  • Low Leverage

Loan Amount
150K+

Min. Rate
8.0% – 18.0%

Term Length
12 – 24 mos

Closing Time
3 – 4 Weeks

Max LTV
60%

Amort.
Interest Only

Private Lender: Infrastructure

Private Lenders are a good funding source for land acquisition and infrastructure.   These lenders provide short term loans to purchase or refinance the property and the cost of horizonal infrastructure such as roads, and the installation of required utilities.  Lenders financing infrastructure anticipate that they will be paid off through a verticle construction loan (buildings) or the sale of the property.  

Pros

  • Underwriting Flexibility
  • Quick Closing
  • Interest-only Payments
  • Pricing Based on Exit Strategy and LTV

Cons

  • High Interest Rate
  • Higher Fees
  • Short Term
  • Low Leverage

Loan Amount
150K+

Min. Rate
8.0% – 15.0%

Term Length
12 – 24 mos

Closing Time
4 – 6 Weeks

Max LTV
60%

Amort.
Interest Only

SBA 504

The SBA 504 program may be used to finance the acquisition and/or development of an existing building, ground-up construction, expansion of a building, or heavy equipment.  SBA 504 loans can be an solid alternative to bank and private lender financing for new business start ups or when traditional financing is unavailable.

Pros

  • 90% Financing
  • Low Down Payments
  • Long Payment Terms
  • Reasonable Interest Rates
  • Wide Variety of Uses

Cons

  • Extensive Paperwork
  • Longer Approval Process
  • Need Good Credit

Loan Amount
500K – $20MM

Min. Rate
5.5% – 7.5%

Term Length
Up to 25 Years

Closing Time
8 – 12 Weeks

Max LTV
90%

Amort.
Up to 25 Years

Private Lender: Vertical Construction

Private Lenders are a good funding source for vertical construction projects.   These lenders provide short term loans to purchase or refinance the land or infrastructure loan and provide financing of the hard and soft costs of construction.  Lenders financing vertical construction anticipate that they will be paid off through a refinance to a long term loan or the sale of the property.  

Pros

  • Underwriting Flexibility
  • Quick Closing
  • Interest-only Payments
  • Pricing Based on Experience and less on Credit

Cons

  • High Interest Rate
  • Higher Fees
  • Short Term
  • Extension Fees, if more time is needed.

Loan Amount
500K+

Min. Rate
6.5% – 12.0%

Term Length
12 – 36 mos

Closing Time
4 – 6 Weeks

Max LTV

85% LTC

Amort.
Interest Only

Preferred Equity Investment

Preferred Equity investors provide equity capital for use in the financing of A & D projects.  Typically, Preferred Equity is necessary when the principals do not have adequate capital to fund the project with the senior debt alone.   Many private lenders will lend 65%-70% of the total project costs.   In the event the principals do not have the 30%-35%, Preferred Equity may be a good option.

Pros

  • Low Owner Capital Investment
  • Quick Closing
  • Interest or Ownership % Based Options
  • Wide Range of Property Types

Cons

  • High Quality Asset Only
  • Experience Required
  • Short Term
  • Large Transactions Only

Loan Amount
$1M+

Min. Rate
12.0% – 18.0%

Term Length
12 – 36 mos

Closing Time
2 – 3 Weeks

Max LTV
90% LTC

Amort.
Interest Only