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Construction Loans

Commercial Loans for Entreprenueurs

Construction loans help seasoned entrepreneurs expand and build out franchised hotels, multi-use office space, or assisted living facilities. They begin with interest-only payments, enabling the business to begin operations before principal payments are due.

Two Years Interest-Only:

Construction loans through American Capital Funds partners are uniquely structured, so that the borrower only pays interest for the first two years. This gives ample time for the project to be completed before monthly principal payments are added.

Low Down Payment:

While conventional construction loans need as much as 35% down, our requirements are between 10% and 20% depending on the property type under the Construction to SBA 504 Program.

Closing Costs and Fees:

Various construction costs, as well as closing and soft fees, such as architectural assessments, title insurance, and surveys, can be rolled into the loan, enabling you to keep more cash on hand during the construction process.

Our construction loans are generally short-term loans under the SBA 504 program, where the initial two years are interest only. After the first two years, the principal is converted to a principal and interest payment over a 20-year to 25-year amortization period. All construction loans are based on a floating interest rate both during construction and after construction, so owners typically refinance and obtain more favorable financing at a lower fixed interest rate amortized over a 25-year period. Our loans will require a 10% contingency dollars calculated on total hard costs and 5% contingency dollars calculated on total soft costs in the project. We also require an interest reserve calculated over the construction loan period which is included as part of the total project cost. Most of the loans that are approved provide a secondary form of repayment that is unencumbered ,and in some cases, we may require additional cash collateral during the stabilization period. All of our construction loans require SBA authorization prior to closing and must meet the minimum equity requirements. Conventional construction loans may require up to 35% of the total project costs as the equity contribution.

Transaction Categories

  • Franchised Territory Expansion
  • Brand Conversions
  • Property Expansion and Renovation

Eligible Property Types

  • Hospitality
  • Skilled Nursing
  • Assisted Living
  • Retail
  • Medical Offices
  • Franchised
  • Restaurants
  • Warehouse / Industrial
  • Self-Storage Facilities

Program Guidlines

Maximum Advance Rate

70% – 85% of cost


10% contingency and interest reserve must be accounted for in the project cost.

Post-Closing Liquidity

5-10% of total loan amount (1st+ 2nd mortgage amount), available upon completion of construction.

Third Party Cost Review

Borrower must agree to third-party cost review, contractor evaluation report, and third-party fund monitoring during construction. All related costs may be included in project cost

Performance Bond

Borrower may be asked to provide performance bond from their contractor. Subject to third-party review of contractor.

SBA Eligibility

The borrower must be eligible under the SBA 504 or SBA 504 Green Loan initiative programs.

Maximum LTV For 1st Trust Deed

  • Multi-Purpose 50% – 55% (Maximum LTV – Up to 90% on total project cost)
  • Hospitality & Special Purpose 50% – 55% (Maximum LTV – Up to 85% on total project cost)

Cash Collateral(May Be Required)

Additional cash collateral equivalent to 5% to 10% of the total project cost may be required during the construction phase if the Borrower and Guarantors do not meet the Global Debt Service Coverage Ratio requirements (0.50x-1.00x from surplus cashflow). Cash Collateral will generally be released upon completion of construction and issuance of the SBA 504 debenture.

Additional Hospitality Requirements

Midscale or upper midscale limited-service or select-service franchises only. Property must be located in an economically diverse community with a population >50,000.