05Draws, carry, conversion
Construction and expansion finance
Ground-up on land you own, an addition to the building you occupy, or a fit-out that turns a shell into premises. Funded in draws against inspections, carried on interest during the build, and converted to permanent debt at certificate of occupancy.
The capital stack
- Owner equity and land15%
- SBA debenture at conversion30%
- Construction first55%
Terms
What this programme actually looks like
- Funding
- Monthly draws against a schedule of values, inspected before release
- Carry
- Interest-only on the drawn balance, usually with a funded interest reserve
- Term
- 12 to 24 months of construction, then conversion to permanent
- Equity
- Land already owned generally counts toward the injection at its appraised value
- Occupancy
- New construction under an SBA programme requires 60% owner occupancy
- Timeline
- 60 to 100 days to close, driven by plans, permits and the general contractor
Illustrative only. Bollard is a fictional business built as a website demonstration — the figures below are worked examples, not an offer, a quote or a rate sheet.
Fit
When it is right, and when it is not
A lender that only publishes the first list is selling. Both lists below are the same length in real life.
The right instrument when
- You own land next to the operation and want to build rather than move.
- No building on the market fits what the business actually does.
- An expansion pays for itself in throughput rather than in rent avoided.
- The equipment and the building are one project and should be financed as one.
The wrong instrument when
- Drawings are conceptual and the contractor is not selected. A budget that moves is a budget that cannot be drawn against.
- The business needs the space in four months. Construction is the slowest instrument here, without exception.
Underwriting
What gets looked at, in what order
- 01
The budget is the file
A schedule of values, a contract with a named contractor, a contingency that a lender believes, and a draw process everyone agrees to before the first pour.
- 02
Cost overrun
Who funds the overage, and from where, is decided at closing. Ten percent contingency is normal; nought percent is a red flag.
- 03
Conversion
The permanent loan is sized at the start against completed value and stabilised cash flow, not against the construction budget.
Worked example
Worked example — 15,000 sq ft addition
- Land already owned (appraised)
- $320,000
- Hard costs
- $2,050,000
- Soft costs and contingency
- $310,000
- Total project
- $2,680,000
- Construction loan
- $2,280,000
- Interest reserve inside the loan
- $96,000
A worked example. Carry depends entirely on the draw curve — model yours before you sign a contract.
Questions
What people ask about this programme
Does my land count as the down payment?
Generally yes, at appraised value, and how long you have owned it can matter. Raise it at the start — it often changes what the deal needs in cash.
What is an interest reserve?
Money inside the loan that pays the construction interest so the business does not carry it out of operating cash. It is real debt and it is worth sizing carefully.
Next bay
Tell us about the building
A twenty-minute conversation is usually enough to know whether a deal works, which programme fits, and what your equity actually supports.
Or call the desk
(816) 555-0142Monday to Friday, 8am – 6pm Central
A demonstration number in the range reserved for fiction. It does not ring anywhere.