Breaking ground on a new commercial construction project requires substantial capital, careful planning, and the right financing partner. Whether you’re developing an office tower, retail complex, or multi-family building, securing the right construction loan can determine your project’s success from foundation to certificate of occupancy.
What Are Commercial Construction Loans?
A commercial construction loan is specialized financing designed for ground-up development projects. Unlike traditional mortgage products that finance existing buildings, construction loans provide funding to acquire land and cover building costs as your project progresses from blueprints to completed structure.
One West Hard Money offers fast, flexible construction financing for developers and investors throughout Missouri and beyond, with loan amounts from $5 million to $100 million and funding in as little as 8 days.
How Commercial Construction Loans Work
Construction loans function differently than conventional real estate mortgage financing. Instead of receiving the full loan amount at closing, borrowers access funds through a draw schedule tied to construction milestones.
The Construction Process
Phase 1: Loan Approval and Closing
Your construction lender evaluates the project based on plans, budgets, market analysis, and the development team’s experience. Once approved, the loan closes with an established construction budget, draw schedule, and closing costs clearly outlined. These closing costs typically include origination fees (1-3% for One West loans), title insurance, appraisal fees, legal costs, and other transaction expenses.
Phase 2: Construction Draws
As construction progresses through each construction phase, the borrower requests fund disbursements at predetermined milestones. The building process includes common draw points such as site preparation, foundation work, framing, mechanical systems, interior finishes, and final inspection.
The lender inspects work at each stage before releasing funds, ensuring construction proceeds according to the construction plan and budget. This draw system protects both lender and borrower by tying funding to actual progress.
Phase 3: Stabilization and Permanent Financing
Upon completion of the construction period, the project enters the lease-up or stabilization phase. Once the building achieves target occupancy and demonstrates stable income, developers typically refinance the construction loan into permanent financing—a permanent mortgage with lower interest rates and longer loan terms. This construction to permanent loans transition is a critical part of the development strategy.
Types of Commercial Construction Projects
One West finances new construction across multiple commercial property types:
Office Towers and Buildings
From suburban office parks to downtown high-rises, office construction requires substantial capital and extended development timelines. One West provides construction loans up to $100 million with terms up to 72 months, accommodating complex office development schedules.
Retail Complexes and Shopping Centers
Retail construction projects including strip centers, shopping plazas, and mixed-use retail developments need flexible financing that adapts to tenant improvements and pre-leasing requirements. Our construction financing supports retail projects at every scale.
Industrial Facilities
Warehouse, distribution, manufacturing, and flex-space developments serve growing demand for industrial real estate. One West’s industrial construction loans recognize these properties’ unique specifications and tenant needs, with financing options tailored to industrial building requirements.
Multi-Family Buildings
Apartment buildings, condominiums, and multi-family housing developments represent significant construction opportunities. Our multi-family construction loans provide the capital needed to build residential communities from the ground up, creating housing assets that generate long-term income.
Commercial Construction Loan Terms
One West structures construction financing with terms designed for ground-up development:
Loan Size: $5M – $100M
One West finances substantial commercial construction projects, with minimum loan amounts of $5 million and capacity up to $100 million for major developments. This range accommodates everything from mid-sized apartment buildings to large-scale mixed-use complexes.
Flexible Loan Terms: 12 – 72 Months
Construction timelines vary based on project size and complexity. One West offers loan terms from 12 months for straightforward builds to 72 months for large, phased developments requiring extended construction and stabilization periods. This flexibility allows developers to match financing to realistic construction schedules without artificial time constraints.
Fixed Interest Rate: 10.5%
Predictable financing costs matter during construction when budgets face multiple variables. One West’s 10.5% fixed interest rate provides certainty, with interest reserve options that capitalize interest during the construction phase. This fixed-rate approach eliminates uncertainty about payment obligations as interest rates fluctuate in the broader mortgage market.
Interest Reserve Available
Cash flow management during construction can challenge even well-capitalized developers. One West’s interest reserve option allows you to capitalize interest only payments, preserving capital for construction costs and avoiding monthly payment obligations during the building phase. This structure differs from traditional mortgage products that require regular payment of principal and interest from day one.
Competitive Origination: 1% – 3%
Construction loan origination fees from 1% to 3% remain competitive while supporting the additional underwriting, inspection, and administration these complex projects require.
Loan-to-Value Up to 80%
One West provides up to 80% LTV on commercial construction projects, balancing developer equity requirements with project feasibility. The LTV calculation considers land value, construction costs, and projected stabilized value of the completed assets.
Post-Stabilization DSCR: 1.25x
While no debt service coverage ratio applies during construction (before the property generates income), One West requires 1.25x DSCR post-stabilization. This ensures the completed project will support permanent financing or permanent mortgage refinancing once lease-up achieves target occupancy.
Non-Recourse Structure
One West’s non-recourse construction loans limit personal liability, providing important protection for developers and investors. This structure allows you to pursue ambitious projects while managing risk appropriately.
No Prepayment Penalties
Construction projects sometimes progress faster than anticipated, or developers may secure advantageous permanent financing before the scheduled loan maturity. One West charges no prepayment penalties, giving you complete flexibility to refinance into a permanent mortgage when it makes financial sense.
Rapid Funding: 8 Days
Speed matters in commercial development. Once your project receives approval, One West funds construction loans in as little as 8 days, allowing you to lock in land contracts, secure contractor agreements, and begin construction without delays.
Who Needs Commercial Construction Loans?
Real Estate Developers
Professional developers building commercial properties need construction lenders who understand development timelines, cost contingencies, and market cycles. One West’s experience financing ground-up projects provides the partnership developers require, with financing options that match real-world development needs.
Commercial Property Investors
Investors diversifying into development or pursuing build-to-suit opportunities need flexible construction financing without the bureaucracy of bank loans. One West offers streamlined approval and fast funding that matches investment timelines, with less emphasis on personal credit history and more focus on project quality.
Builder-Developers
Construction companies expanding into development or building spec properties require financing partners who understand both construction and real estate investment. One West evaluates projects holistically, considering building experience alongside market fundamentals.
The Construction Loan Application Process
Step 1: Initial Project Discussion
Contact One West to discuss your commercial construction project. Share information about the site, project type, development plans, construction budget, and timeline. Our team provides preliminary feedback on feasibility, potential loan amount, and appropriate financing options.
Step 2: Formal Application and Due Diligence
Submit detailed project information including site plans and architectural drawings with detailed specifications, engineering reports, itemized construction budget and cost estimates, development pro forma and market analysis, general contractor qualifications, anticipated construction schedule with time estimates for each phase, and exit strategy (permanent financing, permanent mortgage, or sale).
Step 3: Loan Approval and Documentation
Upon approval, One West issues a loan commitment outlining all terms, conditions, requirements, and closing costs. Legal teams prepare loan documents, construction agreements, and draw procedures in order to proceed to closing.
Step 4: Closing and Initial Funding
The construction loan closes with initial funds for land acquisition (if needed) and site preparation. The remainder of the loan amount is reserved in a construction escrow account, ready for disbursement as work progresses.
Step 5: Construction Draws and Monitoring
Throughout construction, submit draw requests with supporting documentation including contractor invoices and lien waivers, inspection reports confirming work completion, updated construction budget showing money spent versus remaining, and photos documenting progress through each construction phase. One West reviews each request and releases funds typically within 3-5 business days.
Step 6: Completion and Transition
Upon construction completion and certificate of occupancy, the project enters lease-up or stabilization. Work with One West to either extend the loan for additional stabilization time or transition to permanent financing based on your strategy.
Key Considerations for Construction Financing
Construction Budget and Costs
Accurate cost estimation is critical for construction loan approval and project success. Your budget should include land acquisition costs, site preparation and utilities, hard costs (building construction, materials, labor), soft costs (architectural, engineering, legal, permits), contingency reserve (typically 5-10%), construction loan interest and closing costs, lease-up and marketing costs, and property insurance during construction.
Contractor Selection
Your general contractor significantly impacts construction timeline, quality, and budget adherence. One West evaluates contractor qualifications including previous projects of similar size and type, financial stability and bonding capacity, safety record and subcontractor relationships, and references from past clients and lenders.
Market Analysis
Construction lenders analyze local market conditions to ensure adequate demand for your project type. Strong market fundamentals support construction loan approval and improve permanent financing prospects upon completion.
Exit Strategy Planning
Before breaking ground, establish a clear exit strategy. Common approaches include refinancing to permanent financing upon stabilization, selling to end users or investors, or holding with extended terms. Most developers refinance construction loans into permanent mortgages once buildings are stabilized and generating income.
Advantages of Private Money Construction Loans
Speed and Certainty
Traditional bank construction loans can take 60-120 days for approval. One West provides funding decisions quickly and closes in 8 days, giving you certainty that your project can proceed on schedule.
Fewer Documentation Requirements
While One West conducts thorough due diligence, the process focuses on project fundamentals rather than mountains of paperwork. We don’t require perfect credit scores or extensive personal credit history documentation. Experienced developers with solid projects appreciate streamlined underwriting that respects their time and expertise.
Flexible Structures
Every construction project has unique characteristics. One West customizes loan structures to fit your project rather than forcing you into rigid bank mortgage products. This flexibility extends to draw schedules, interest reserves, extension options, and guarantor requirements.
Relationship-Based Lending
Building successful projects requires collaboration between developer and lender. One West establishes true partnerships, working through challenges that inevitably arise during construction rather than rigidly enforcing terms that may not fit evolving circumstances.
Non-Recourse Protection
Traditional construction loans typically require full recourse and personal guarantees from developers. One West’s non-recourse structure provides important liability protection while still ensuring both parties remain aligned on project success.
Frequently Asked Questions About Construction Loans
How much can I borrow with a construction loan?
One West provides construction loans from $5 million to $100 million, with the specific loan amount depending on project cost, land value, and projected stabilized value. The 80% LTV limit means you’ll need to contribute 20% equity.
What are typical closing costs for construction loans?
Closing costs for commercial construction financing include origination fees (1-3%), appraisal costs, title insurance, legal fees, survey costs, environmental reports, and recording fees. Total closing costs typically range from 2-5% of the loan amount.
Can I make interest-only payments during construction?
Yes. One West offers interest only payments during the construction period, with an optional interest reserve that capitalizes interest so you make no monthly payments until the building is complete and generating income.
How long do I have to complete construction?
One West offers loan terms from 12 to 72 months. Most projects target 12-month to 24-month construction timelines, with additional time for stabilization before converting to permanent financing or permanent mortgage products.
What if construction costs exceed the loan amount?
If your project encounters cost overruns, you’ll need to contribute additional money to complete construction. This is why experienced developers build 5-10% contingency reserves into budgets and maintain financial capacity beyond the minimum equity requirement.
Do I need good credit to qualify?
One West focuses more on project quality than personal credit scores or FICO ratings. While we consider credit history, strong projects with experienced teams can secure approval even without perfect credit profiles.
What happens after construction is complete?
Most developers refinance construction loans into permanent financing once buildings are stabilized and generating income. This construction to permanent loans transition provides long-term mortgage financing with better terms, lower rates, and amortization that pays down principal over time.
What types of properties can I build?
One West finances office towers, retail complexes, industrial facilities, and multi-family buildings. We provide construction financing for ground-up commercial projects across all major property types.
Construction Loan vs. Traditional Mortgage
Understanding the differences between construction loans and traditional mortgage products helps set appropriate expectations:
Construction Loans:
- Finance ground-up development
- Draw schedule based on construction progress
- Higher interest rates (reflecting higher risk)
- Shorter terms (12-72 months)
- Interest-only or interest reserve options
- DSCR not applicable during construction period
Traditional Commercial Mortgages:
- Finance existing, income-producing properties
- Full funding at closing
- Lower interest rates
- Longer terms (5-30 years) with amortization
- Payment of principal and interest from property income
- DSCR typically 1.20-1.35x minimum
Many developers use construction loans to build properties, then refinance into traditional mortgage products once projects are stabilized.
Commercial vs. Residential Construction Loans
While One West specializes in commercial construction loans, it’s helpful to understand how these differ from home construction loans:
Commercial construction loans finance office buildings, retail centers, industrial facilities, and multi-family properties with loan amounts from $5M-$100M. Qualification focuses on project feasibility and developer experience rather than personal credit scores or FICO ratings.
Home construction loans finance single-family custom homes, dream homes, and personal new home construction with smaller loan amounts. Qualification is based on borrower income and credit history, and these loans often convert to permanent mortgage financing after the construction period.
One West specializes in commercial projects, not personal home construction loans or residential financing.
St. Louis and Missouri Construction Markets
As a St. Louis-based commercial construction lender, One West possesses deep knowledge of Missouri development markets. The St. Louis region offers diverse construction opportunities from downtown office towers to suburban industrial parks. One West finances ground-up projects throughout St. Louis City, St. Louis County, and St. Charles County.
Our construction financing extends throughout Missouri, supporting commercial development in Kansas City Metro, Springfield, Columbia, and emerging markets throughout the state.
Construction Loan Example
To illustrate how construction financing works, consider this example:
Project: 50-unit multi-family apartment building
Land Cost: $1,000,000
Construction Cost: $8,000,000
Total Project Cost: $9,000,000
One West Loan (80% LTV): $7,200,000
Developer Equity (20%): $1,800,000
Loan Terms:
- Interest Rate: 10.5% fixed
- Loan Term: 24 months (12 months construction + 12 months stabilization)
- Payment: Interest-only with interest reserve
- Origination Fee: 2% ($144,000)
Timeline:
- Months 1-12: Construction phase with no monthly payments (interest capitalized)
- Months 13-24: Lease-up and stabilization generating income
- Month 24: Refinance to permanent mortgage at stabilized value
This example shows how construction loans work in practice, with the short-term loan facilitating development before conversion to long-term permanent financing.
Risk Management in Construction
Construction projects carry inherent risks that both developers and lenders must address. Physical construction involves timing, weather, material availability, labor, and unforeseen site conditions. Market conditions can change during the construction period. Cost overruns and funding gaps threaten project completion.
One West’s experienced team helps developers identify and address these risks during the underwriting and construction process. Mitigation strategies include experienced general contractors with proven track records, realistic construction schedules with built-in contingency time, budget reserves for unforeseen conditions and change orders, conservative market assumptions, and regular inspections and progress monitoring.
Why Choose One West for Construction Financing
Substantial Loan Capacity
With construction loan sizes from $5 million to $100 million, One West finances major commercial development projects that many private lenders cannot accommodate.
True Non-Recourse Structure
Most construction lenders require full personal guarantees from developers. One West’s non-recourse approach provides meaningful liability protection while maintaining appropriate project incentives.
Fast Decisions and Funding
Eight-day funding timelines give developers certainty that financing won’t delay land closing, contractor mobilization, or project schedules—a critical advantage in competitive markets.
Flexible, Customized Structures
Every construction project has unique requirements. One West creates loan structures tailored to your specific project rather than forcing you into one-size-fits-all mortgage products. This includes flexible specifications, draw schedules, and terms that match your building process.
Experienced Commercial Real Estate Team
One West’s team has decades of experience financing commercial construction projects. We understand development timelines, market cycles, contractor issues, and the countless variables affecting ground-up projects.
Relationship-Based Partnership
Construction projects span months or years, with inevitable challenges along the way. One West approaches construction lending as true partnership, working collaboratively to address issues and ensure project success.
Getting Started with Your Construction Project
Ready to break ground on your commercial development? Here’s how to begin:
- Contact One West at (314) 970-4061 or loans@onewesthardmoney.com
- Discuss your project including site information, building type, construction budget, and timeline
- Submit project materials including plans, budgets, market analysis, and team qualifications
- Receive loan commitment outlining terms, conditions, and funding schedule
- Close quickly and begin construction with confidence
Serving Commercial Developers Nationwide
While based in St. Louis, Missouri, One West finances commercial construction projects throughout the United States. Our team has evaluated and funded ground-up developments in markets nationwide, bringing local expertise and institutional-quality underwriting to every project.
Commercial construction requires substantial capital, careful planning, experienced teams, and the right financing partner. One West Hard Money provides construction loans from $5 million to $100 million with flexible terms up to 72 months, non-recourse structure, and funding in just 8 days.
Whether you’re developing an office tower, retail complex, industrial facility, or multi-family building, One West brings the expertise, capital, and collaborative approach to help you succeed. Our construction financing allows you to focus on building exceptional projects while we handle the financing side.
Contact One West today to discuss your commercial construction project and discover how our construction loans can bring your development vision to reality.
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