Sources of Money for Construction Projects

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  1. Commercial Banks – short and intermediate term financing
  2. Savings and Loans – small residential loans
  3. Insurance Companies – restricted long term loans
  4. Pension and Trust Funds – long term loans. These funds are often administered by commercial banks.
  5. Real Estate Investment Trusts (REITS) – long and sort term loans, land loans, second mortgages, sell and leaseback deals.
  6. Governmental Agencies – FHA and VA loans for residential work (guarantee loans)
  7. Government Sponsored Bonds – industrial revenue bonds for projects that increase employment. local governments inssue tax-exempt bonds secured by the project income.
  8. Mortgage Banking Firms – long and short tem loans, land loans, second mortgages, sell and leaseback deals.

Many projects will draw on two or more sources of money. Short term loans are typicaly less than 3 years. Long term loans are usually more than 10 years and may have terms up to 30 years. One of the things all these sources have is common is that they are selling you their money. They are not purchasing your project. When obtaining a loan, you must be able to show that the project will be able to generate enough money to pay back the loan.

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