Finding Construction Loans for Builders is Easier Than You Think

July 7, 2022

The real estate market for single-family homes is at record-high levels across the Greater Houston area, forcing builders to scramble to keep up with the tremendous demand from eager home buyers. If you’re a spec home builder or custom home builder in need of reliable financing solutions to resolve cash flow issues during construction, Texas Gulf Bank can help.

What Are Construction Loans for Builders?

Construction loans are short-term loans that cover a wide range of costs and expenses related specifically to construction projects. For builders that need to borrow money and improve their cash flow with favorable loan terms, these loans are a strategic, ideal solution.

Builders can use the funds from construction loans to cover a wide range of building costs, including:

• Building materials
• Home fixtures (plumbing, lighting, flooring)
• Contractor and subcontractor labor
• Architecture fees
• Inspection costs
• Appraisals
• Landscaping
• Appliances

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When Is It the Right Time to Use a Construction Loan?

A construction loan provides builders with leverage so that cash is not tied up in one project. Builders can then work on additional homes at the same time, which creates cost synergy.

You’ll be able to keep some cash on hand to help cushion unforeseen costs during a project. Plus, construction loans can be a far cheaper option than tapping into equity or pursuing joint venture partnerships.

At Texas Gulf Bank, we can help you evaluate when it’s a good time to tap into a construction loan. We’ll look at the overall scope for each project and work with you to structure a deal that fits the specific requirements for each one.

We understand that not all projects are the same. You could be building a large spec house in an upscale area of Houston while simultaneously working on several townhomes elsewhere in the Houston area. Each project brings different challenges. Working with a bank that can provide you with customized loans – not a “one size fits all” – is highly beneficial to our borrowers.

Construction-Only Loan

A commercial construction-only loan is a short-term loan designed to cover the specific building phase, with an average loan term of one year. These loans usually have higher interest rates than a typical loan.

Other Ways Construction Loans Help Constructors

When you consider recent fluctuations in interest rates, difficulties with supply chain deliveries, and the effects of inflation on the economy, builders have seen firsthand the importance of having flexible project funding.

Every aspect of home construction has been impacted in some way by market variations, resulting in budget strains and financial instability from the start of construction to when construction is complete. We recognize that builders continue to experience supply chain delays and skyrocketing prices for:

• Labor
• Lumber
• Flooring
• Roofing materials
• Walls and insulation
• Appliances
• Windows
• Doors

Construction loans can help offset delays caused by cash flow issues and pricing variations for materials and labor. Builders gain the leverage needed to free up cash so they can focus on constructing multiple homes instead of just one at a time, with a needed financial cushion in the event of unexpected costs.

In addition, construction loans can be a much cheaper financing option than searching for equity or joint venture partners. Borrowers can retain control over construction projects without having to sacrifice ownership equity or miss out on future investment opportunities.

How To Apply for Construction Loans

With 100 years of banking experience, Texas Gulf Bank excels at developing financial solutions that meet specific industry and business needs. We have extensive experience with single-family construction loans and we strive to make the application and loan process smooth and seamless from start to finish.

Ready to get started? Builders interested in construction loans through our bank will need to submit the following, including but not limited to:

• Completed loan application
• 2-3 years of personal and business tax returns
• 2-3 years of year-end and current business financials
• Construction design
• Building schedule
• Construction budget

If approved, we will ensure that all construction draws are funded promptly once draw requests are submitted, eliminating cash flow and budgetary strains. In addition, loan specialists are committed to building a strong relationship with each borrower to ensure you experience a personal touch and receive a helping hand with each aspect of the loan process.

Contact Texas Gulf Bank for Construction Financing Today

With decades of industry knowledge and experience, our team of dedicated loan officers understand the unique needs of builders along the Texas Gulf Coast. Construction loans through our bank allow your construction company to flourish and build stunning homes for those in our community.

We have built a robust system that makes it easy to complete the application process and receive access to funding if approved for a loan.

For more information about construction loans for builders, contact Texas Gulf Bank today. You can also get started by completing the contact form below. We look forward to supporting your next project!

All Loans Subject to Credit Approval