Welcome back to another insightful episode of the Smarter Lending Podcast! A second part of our series on SBA (Small Business Administration) Construction Lending, featuring experts Nick Jellum, Michele Walters, and Trevor Richardson covered a wide range of essential topics, from pre-construction due diligence to managing disbursements and ensuring the proper use of lien waivers.
Key takeaways from this episode include
- Thorough Pre-Construction Analysis Trevor emphasized the importance of a comprehensive pre-construction analysis. This step is critical for identifying potential issues in the drawings, budget, and contract before construction begins. By addressing these concerns early, lenders can mitigate risks and set the stage for a successful project.
- Effective Management of Disbursements Michele and Trevor shared best practices for managing disbursements during the construction phase. Monthly disbursements using AIA Applications for Payment and physical onsite inspections ensure that the project’s progress is accurately tracked, and funds are appropriately allocated.
- The Critical Role of Lien Waivers Lien waivers are essential for protecting the project against outside liens and ensuring that funds are distributed to the right parties. Both conditional and unconditional lien waivers should be collected and properly filed to maintain legal protections and financial clarity.
- Proactive Monitoring and Communication Keeping the project on schedule and within budget requires constant communication between all parties involved. Trevor highlighted the need for accurate Applications for Payment and a diligent review process to ensure that disbursement requests are justified and properly documented.
- Addressing Common Issues From over-budget construction to seasonal delays, Michele stressed the importance of having tough conversations early with borrowers and contractors. By addressing potential shortfalls as soon as they arise, lenders can prevent project delays and financial complications.
How LCS Can Assist With The Construction Draw Phase
At LCS, we understand the complexities of SBA construction lending and offer comprehensive services to support lenders throughout the construction process. Our team of construction experts provides consultative services to help mitigate risks and ensure project success.
Pre-Construction Analysis Our Plan, Specification, and Cost Review (PSCR) service determines if the hard cost budget is adequate and reflects the work shown on the project plans. We identify contract and permitting issues, ensuring the project can be completed on schedule and within scope. Our specialists provide risk-mitigating recommendations to address any potential issues.
Construction Monitoring We conduct periodic inspections to provide physical confirmation of progress and appropriateness of funding. Our experienced construction professionals verify contractor payment requests, review lien waivers, and track schedules to ensure project milestones are met.
Property Condition Assessments (PCA) and Property Inspection Reports (PIR) Our PCA provides a thorough physical inspection of building and site systems, along with cost projections for repairs or replacements. The PIR offers a more limited scope but includes an evaluation of current conditions and recommendations for immediate repairs.
Peer Review Services LCS offers peer reviews of Property Condition Reports, PSCRs, and Draw Inspection Reports to ensure adherence to industry standards and accuracy of findings.
Construction Owner’s Representative LCS can act as an extension of the project owner, managing everything from A/E design team procurement to project turnover and closeout. This service ensures effective coordination among all parties and helps prevent schedule delays and budget overruns.
Lien Waiver Collection LCS helps track and manage lien waivers from all subcontractors and suppliers, providing an additional layer of security for lenders and ensuring compliance with legal requirements.
Proactive Communication and Monitoring Our team maintains constant communication with all parties involved, setting clear expectations, and ensuring that projects stay on track. We provide regular updates and detailed reports to keep lenders informed throughout the construction phase.
Issue Resolution When issues arise, our experts step in to facilitate discussions between borrowers, contractors, and lenders, helping to find solutions and keep projects moving forward.
By leveraging our expertise and comprehensive services, LCS can help lenders navigate the complexities of SBA construction lending, ensuring that projects are completed on time, within budget, and in compliance with all legal requirements.
Tune in to the latest episode of the Smarter Lending Podcast for more expert insights and practical advice on managing SBA construction loans. And remember, LCS is here to support you every step of the way, helping you lend smarter and achieve better outcomes for your projects.
Stay informed and keep lending smarter!
LCS Team
Meet Our Guests
Liz Mahoney
Liz Mahoney is host of the SmarterLending podcast. As part of the Senior Management team at LCS, Liz is instrumental in driving the strategy and growth of the Sales and Business Development division. She leads her team in nurturing existing relationships and developing new ones with lending clients nationwide, providing tailored consultations and education on LCS’s Valuation, Environmental, and Construction products to meet clients’ Risk Management needs.
Michele Walters
Over the past decade, Michele – who you may know as SBA Loan Gal – has become the go-to-expert for all things regarding SBA lending. Michele uses her financial and lending experience to help entrepreneurs realize their dream of running successful businesses by financing business acquisitions and refinancing debt to improve cash flow.
Connect with Michele on LinkedIn
Nick Jellum
Nick Jellum is the President of Jellum Law, P.A. where he focuses his practice on advising the firm’s financial institution clients throughout the Country on all aspects of commercial loan transactions, from loan documentation and loan workouts, to collections and liquidation, specifically focusing on SBA 7(a) government-guaranteed loans.
Trevor Richardson
Trevor W. Richardson is a Project Manager at Lender Consulting Services (LCS). He joined LCS in 2020 and brings over 5 years of experience in the field. He specializes in Property Condition Assessments, Plan and Spec Cost Reviews, and Construction Draw Monitoring. Trevor is skilled in Construction Monitoring, Construction Policy, and Technical Reporting & Analysis, with a strong focus on ensuring quality and consistency in the LCS draw program. His expertise also includes reviewing construction documents and advising on lending institution standards and policies.
Connect with Trevor on LinkedIn
To learn more, reach out to Liz Mahoney, Director of Sales & Business Development today.
