Ground up construction loans.
A ground-up construction loan funds building on land rather than buying something already standing. Ground-up construction financing releases money in draws as the work is completed and inspected, not as a lump sum at closing, and it is sized against what the finished building will be worth as well as what the project costs. The draw schedule, not the rate, is what usually decides whether the build stays on programme.
The draw schedule is the product.
Everything else about a construction loan is negotiable detail. How the money actually reaches the site is what you live with for the length of the build.
You fund the stage, then get reimbursed
Draws are released against work COMPLETED and inspected, not work scheduled. That order is the whole point of the product from the lender’s side, and it means your subcontractors’ payment terms and the inspection cadence have to line up. Where they do not, you are carrying the gap out of working capital. It is the most common reason a fully-approved build gets tight.
Interest is on what is drawn, not the facility
On a properly structured construction loan the cost curve rises as the build progresses rather than sitting flat from closing. A model that charges the full facility from day one overstates the carry substantially. Ask which you are being quoted, because two loans at the same headline rate can differ by a lot across a two-year term.
What underwriting looks at on a ground-up deal.
- 01
The land, and what it is entitled for
Not just the lot value. What you are permitted to build on it, and how far through that process you already are.
- 02
The budget against the plans
These have to agree. A budget that does not match the drawings is the most common reason a ground-up file stalls, because every draw afterwards is measured against it.
- 03
Whether you have finished work like this
Comparable completed projects carry real weight here in a way they do not on a purchase loan. The lender is financing a plan, and the record is the evidence the plan gets executed.
- 04
What repays it
A sale, or a refinance into long-term financing on the finished building. On a spec build the exit is the sale, which puts the weight on comparable sales and days on market for the finished product.
Building in California puts the risk in the calendar.
Every page ranking for this subject is written without a state in mind, which is fine until you finance a build over a fixed term. Plan check and inspection cadence vary by jurisdiction, and a draw cannot be released for a stage that has not been signed off. Schedule risk therefore lands directly on the loan, not just on the build.
Two practical consequences. Ask for the term the permitting reality supports rather than the one the optimistic schedule implies, because an extension negotiated under pressure is the expensive kind. And budget for the fact that a completed building is reassessed on its new value, which arrives as a separate supplemental bill rather than inside the tax line you have been paying on the land.
The reassessment point is a public rule rather than a lending term. Source: the California BOE supplemental assessment guidance, which treats completed new construction as a supplemental event in the same way as a change of ownership.
What the financing side looks like.
| Loan size | $250K – $10M+ |
|---|---|
| Term | 12 – 24 mo |
| Max loan to cost | Up to 85% |
| Max loan to value | Up to 70% ARV |
| Rate | Set by a term sheet — we do not publish one |
Full programme detail, the draw mechanics and the document list sit on the construction programme page. Buying something already standing and renovating it instead? That is a residential transition loan.
Ground-up questions, answered.
What is a ground-up construction loan?
Short-term financing for building on a lot, as opposed to buying or renovating an existing structure. The lender advances a first tranche at closing, then releases the rest in draws as defined stages of work finish and pass inspection. Because there is no building to appraise yet, the loan is underwritten on the land, the budget, the plans and the value the finished project is expected to support.
How do construction draws actually work?
The budget is broken into stages, and money is released against work completed rather than work scheduled. Each draw typically needs an inspection confirming the stage is done, and there is usually a retainage held back until completion. The practical consequence is that you fund the stage first and get reimbursed, so the schedule has to match your subcontractors' payment terms or you carry the gap yourself. That mismatch, not the interest rate, is what most often strains a build.
What is a spec construction loan?
The same product where the finished home is built to sell rather than to occupy. The underwriting question changes with the intent: on a build-to-sell the exit is the sale, so comparable sales and days-on-market for the finished product carry more weight than they would if you were refinancing into a long-term loan and keeping it.
What do ground-up construction loans cost to run?
Interest normally accrues only on what has been drawn, not on the full facility, so the cost curve rises as the build progresses rather than sitting flat from day one. The programme here is published at $250K – $10M+ over 12 – 24 mo, up to 85% of cost. Up to 70% ARV caps it against the finished value rather than the money spent. Rate is set on a term sheet against the specific deal — NexWin Capital Corp. arranges financing through third-party lenders and does not set price, so no rate is published here.
What do ground-up construction lenders look at?
Four things, in roughly this order: the land and what it is entitled for, the budget against the plans, the builder's record of finishing comparable work, and what repays the loan at the end. A budget that does not match the drawings is the most common reason one of these stalls, because every draw afterwards is measured against it.
What is different about building in California?
The calendar, mainly. Plan check and inspection cadence varies by jurisdiction and it is the single biggest source of schedule risk on a project financed over a fixed term, because a draw cannot be released for a stage that has not been signed off. Build the permitting and inspection timeline into the loan term you ask for rather than into the optimism at the start, and note that a completed building is reassessed on its new value, which arrives as a separate supplemental bill rather than inside your existing tax line.
Is this page an offer of credit?
No. The terms above are published ranges for a programme, not an offer, quote, pre-approval or commitment to lend, and every deal is underwritten on its own facts. NexWin Capital Corp. arranges financing through third-party lenders. Nothing here is legal or tax advice.