November 2, 2017
In the years following the Great Recession, banks represented the lion’s share of construction financing, typically providing loans for near-total construction costs at a relatively cheap rate of 2.50% on top of LIBOR. Now, amid changes in regulations, banks have tightened up on leverage—instead of 75% to 80%, leverage has dropped to about 65%–and developers are paying almost twice the previous interest rate due to rising spreads and increase to the LIBOR index. The new, more conservative approach to bank financing has caused loans to become smaller and more expensive than before. This has brought a wide array of alternative lending sources into the construction financing arena. With that expanded compass of choices, borrowers also need increased levels of guidance in selecting the source, and solution, that best meets their needs. Jamie Butler, managing director of Walker & Dunlop, spoke with GlobeSt.com on navigating this new lending landscape.