How to Negotiate with the Bank on a Construction Project

Our nation’s current economic climate can make borrowing money difficult for many people, and unfortunately construction companies aren’t insulated from this challenge. When it comes time to secure funds for your next building project, consider that with a little careful negotiation, you might be able to save yourself and your company a substantial amount of money. Here are a few avenues to consider when talking with your bank:


  • Use draw schedules to your advantage – One of the largest factors influencing your ability to borrow funds is your ability to repay them, and draw schedules help the bank regulate your loan’s funds. Because you can propose a schedule that works best with your particular project, you might be able to save in interest costs if the bank agrees to your terms. If your draws occur more toward the end of the loan, or if you are able to sell homes quickly upon completion, you will reap the benefits in lower interest costs.
  • Focus on pre-selling – If your particular project primarily includes pre-sold homes, try using this as a selling point when negotiating with the bank. By demonstrating the success of your construction project, you will show them you are a lower risk, and therefore might be able to gain more favorable loan terms.
  • Think outside of the prime loan box – Most construction projects are funded by prime-based loans, but these interest rates can take their toll, especially if the bank isn’t willing to negotiate your rate. Depending on the size of your company, you might be able to take advantage of other alternatives like the commercial paper market or LIBOR-indexed loans.


The complexities of the construction loan market are vast and can be difficult to navigate while also trying to run a successful company. When negotiating your loan with the bank, it’s recommended that an experienced real estate or construction lawyer do the talking for you. They will be able to assist you in getting the lowest rates and best deals available to make sure your project is affordable. Remember, financial institutions are held by their own internal guidelines, so while some changes can be accomplished, don’t expect a deal that’s too good to be true.

If you are trying to secure a loan with your bank and find that you need additional help, contact The Law Office of Ray Garcia. We will be able to guide you through your questions and concerns, and can be your advocate when negotiating with your bank.

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Law Office of Ray Garcia, P.A.

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