Understanding Construction Loans in Commercial Real Estate

Introduction 

Every development starts with an idea—but transforming that idea into a completed building requires capital. For most developers, that means securing a construction loan for commercial real estate. These loans are designed to finance everything from land acquisition and site preparation to labor and materials, making them one of the most important steps in moving a project forward. 

What Is a Commercial Real Estate Construction Loan? 

A commercial real estate construction loan is a short-term financing tool that provides funding during the building phase of a project. Unlike permanent loans, which are tied to stabilized income, construction loans are based on future performance. According to Investopedia, these loans typically have terms ranging from 12 to 36 months and are repaid or refinanced once the project is complete. 

How CRE Construction Loans Work 

Instead of receiving the full loan amount upfront, developers access funds through “draws,” which are tied to construction milestones. Lenders carefully review budgets, pro formas, and sponsor experience before approving these requests. This staged approach ensures that capital is released in alignment with actual progress. 

Why They’re Different From Traditional Loans 

Traditional loans are secured by existing cash flow, while construction loans rely heavily on projections. That makes them riskier in the eyes of many banks. This is where alternative and specialized lenders play an important role. At HALL Structured Finance, we’ve built our lending platform around the flexibility and speed needed to support construction projects, often providing non-recourse terms that reduce personal risk for sponsors. 

Conclusion 

Construction loans are the financial foundation of development, bridging the gap between vision and reality. By structuring loans that match a project’s unique needs, developers can move forward with confidence. Your next development deserves the right financial foundation. Contact us and let’s turn your plans into progress.