Introduction
Construction lending can be a high-risk investment. From contracts that fail to protect the owner’s interests, to poor quality work that diminishes the value of the collateral, the risks are varied and substantial.
Competent Construction Loan Monitoring can help protect banks, lenders, and financial institutions from these risks. This paper contains everything you need to know to determine what Construction Loan Monitoring services your institution should invest in, as well as how to get the most out of them.
Table of Contents
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01 Introduction
02 Table of Contents
03 What Is Construction Loan Monitoring?
04 What Is a Plan and Cost Review? • The 3 C’s of Construction
05 Cost Review • Constructability • Contingencies • Bonding, Insurance, and Time to Pay
06 Contractor’s Insurance • Liquidated Damages
07 Time to Pay • Off-site Storage (and Other Clauses) • PCR Conclusion
08 What Is A Construction Loan Inspection? • Quality and Completeness of Work •
08 Costs in Line with Draw Requests • Change Order Requests
09 Timeliness of Payment
10 What Is Construction Funds Control?
11 The Role of Technology in Construction Loan Monitoring • Mobile Inspection Software •
11 Drones (Unmanned Aerial Vehicles)
12 Choosing a Construction Loan Monitoring Partner • Broad Expertise • Specific Expertise •
12 Proven Track Record • National Footprint • Speed
13 Conclusion
What is Construction Loan Monitoring?
Construction Loan Monitoring is a group of services that help protect banks, lenders, and financial institutions from the risks inherent in construction lending, including:
01 Incomplete or poorly detailed contract language that leads to bad time and cost estimates,
excessive rework, and/or subpar quality outcomes
02 Problems that arise during the construction process that lead to cost and time overages and/or quality issues
03 Overfunding for incomplete work, or funding that is issued too early or too slowly
04 Funding for trades that are not paid by the General Contractor, resulting in liens against the collateral
05 Inadequate bonding and insurance by the contractor
