Construction Manager Benefits
Very few truths in business or investing are universal–after all, life is complicated, and for every rule, there is an exception out there somewhere.
However, one rule that plays out pretty consistently is that if something is easy, and nearly risk free, it probably won’t be that profitable. Or, if it is highly profitable, there will be 10,000 other companies fighting for a piece of the pie, making life anything but easy on your sales team.
Conversely, if you can figure out how to navigate an area that few others have succeeded in, you have a pretty good potential for profit.
Construction, for better or worse, is one of those areas where few lenders have succeeded.
There are a number of factors that make construction lending particularly perilous, including unfamiliar contracts, potential for setoff, laws that favor property owners and general contractors over suppliers and subcontractors, and the simple reality that a typical construction project is filled with moving parts (literal and metaphorical).
To add to this, the stakes are high–a residential mortgage default is often a $100-300k problem, much of which can be recouped through foreclosure. On the other hand, a commercial construction deal gone south can easily turn into a seven figure problem, with no means for recouping the loss.
Because of this, banks often choose to shy away from construction, and if they don’t, they demand high collateralization to help offset the risk.
The problem with this approach, however, is twofold: First, it limits the financial products available to contractors. Secondly, it hurts the bank’s profitability to have to say no.
With Construction Manager, we hope to bring everybody one step closer to solving this problem.
Unlike the average commercial loan officer, we live, eat, and breathe construction. We have decades of combined experience reading AIA contracts, managing liens, and navigating the potential perils of construction. We know what to look out for, and we know how to help mitigate those risks.
Construction Manager gives banks and loan officers across the country access to our knowledge. By using our services, banks can make an informed decision regarding whether to fund a particular project. Additionally, with our tools, it’s possible to greatly reduce risk exposure on projects once they’re funded.
Construction will never be easy. Construction will never be risk free. But, with the right tools and knowledge, construction can be a boon to everybody’s bottom line.