When someone talks of a traditional lender for construction loans, they usually mention banks. Banks were the go-to for construction loans for a long time, with their low interest rates and fair turnaround times. Unfortunately, times have changed, and it is becoming harder for an average real estate investor to get a loan through the traditional route.
Non-bank lending is the newer construction loan model. It offers several advantages over banks, but these non-bank or private institutions primarily have less red tape. For example, Dominion Financial Services is a leading non-bank lender. Our primary aim is to help investors and developers achieve their goals quickly and efficiently, with as little bureaucratic discomfort as possible.
What Is Non-Bank Construction Lending?
Non-bank construction lending refers to financing from a private institution rather than a traditional bank. As private lenders, non-banks don’t have to follow the same rules and restrictions as traditional institutions.
With fewer regulations, non-bank lending options can offer faster processing times and greater flexibility than banks. Private lenders may also have less stringent loan requirements, allowing investors to fund new construction projects easily and without delay.
Loan requirements still exist in private institutions. That said, applying and qualifying for a construction loan with a non-bank lender is generally easier and more convenient. Lenders are usually more accepting of borrowers with less-than-perfect credit and care more about the project’s value than anything else.
How Traditional Construction Lending Works
A quick overview of non-bank vs. traditional construction lending exposes the complexity of the loan process in commercial banks. Traditional lenders are more concerned with creditworthiness and financial history than a project’s potential and future value. They force investors and borrowers to navigate lengthy, confusing applications and meet strict and often unrealistic qualifications.
Even if an investor meets all the requirements, approval can take 30 to 60 days, depending on several factors, such as appraisal timelines, underwriting queues, or requests for additional documents. In real estate investing, time is of the essence, and investors cannot afford to wait for loan approvals. Waiting risks lost opportunities.
Key Differences Between Non-Bank and Traditional Construction Lending
Non-bank lending is so popular among real estate investors because it offers a stark contrast to traditional options. For example, Dominion Financial Services often closes on loan applications within 48 hours rather than weeks or months. We also offer construction draws in three days or fewer.
The significant difference between non-bank and traditional lenders is in the assessment process. While traditional institutions focus more on the credit and financial history of the potential borrower, private lenders focus mostly on the asset valuation and investment potential. While creditworthiness still matters, it is secondary to the asset.
Why Experienced Investors Prefer Non-Bank Construction Lending
Seasoned real estate investors prefer non-bank lending because they value speed and efficiency. Private institutions provide a quick and consistent lending vehicle. Investors know that speed and long-term dependability are crucial for closing real estate deals and starting projects, and private lenders prioritize these concepts.
Dominion Financial Services understands unique borrower needs. Our loan programs focus on an asset-based approach to appeal to investors with unconventional financial profiles.
Don’t let your credit score or financial history deter you from your project goals. Our team can help you find the right loan option for your real estate project, even one that requires 100 percent financing for property acquisition and rehabilitation costs.
Choose Dominion Financial Services for Your Next Construction Loan
Non-bank lending is an excellent option for experienced real estate investors. The process is less restrictive and complex than traditional lending, and it allows for a quick turnaround, meaning you can be bidding or working on your project within a week.
Dominion Financial Services is a leading non-bank lender offering fast, flexible, and reliable construction loans. We offer loans up to 50 percent of land acquisition, 75 percent of horizontal development costs, and 100 percent of vertical construction costs. With construction draws in as little as three days, what are you waiting for? Contact our team to learn more about what we have to offer.
