C & F Capital of Construction Finance
Progressive Disbursement
Construction loans are typically disbursed in stages or "draws" as the construction project progresses. Borrowers must provide evidence, such as invoices and inspection reports, to verify that specific milestones have been reached before receiving the next disbursement. This ensures that funds are used for their intended purpose and that the project is advancing as planned.
Interest-Only Payments
During the construction phase, borrowers often make interest-only payments on the loan. This means they are only required to pay the interest that accrues on the amount disbursed, rather than repaying the principal balance. This helps manage cash flow during the construction period.
Collateral
The property being constructed or renovated often serves as collateral for the construction loan. If the borrower defaults on the loan, the lender may have the right to take ownership of the property to recover their investment.
Risk Mitigation
Construction finance involves inherent risks, such as cost overruns or delays. Borrowers and lenders often use mechanisms like contingency funds, performance bonds, and construction contracts to mitigate these risks and ensure the project's successful completion.
Regulations and Compliance
Construction projects are subject to various local, state, and federal regulations and permitting requirements. Borrowers must ensure that their construction project complies with all applicable laws and regulations.
