“Commercial construction loan requirements” is a search that usually comes from someone staring down a ground-up build or a major renovation, trying to figure out what a lender will actually want before they apply. Here’s the direct answer: what a traditional commercial construction loan requires (collateral, bonding, financials, a draw schedule tied to project milestones), where SBA financing fits into that picture, and — because REIL Capital doesn’t originate this specific loan type — what REIL can genuinely help with instead: the working-capital gap that shows up before and after the construction loan, not during it.
What a Traditional Commercial Construction Loan Actually Requires
A ground-up commercial construction loan (sometimes called a construction-to-permanent or “construction-perm” loan) is underwritten differently than a standard business loan, because the lender is financing something that doesn’t exist yet. Whether it comes through a bank or an SBA-backed route, the requirements cluster around five things.
Collateral
The land and the completed project itself typically serve as the primary collateral, and lenders commonly want it cross-collateralized against other business or personal assets until the project is complete and de-risked. Until there’s a finished building generating income, the lender is carrying more risk than on a loan against an existing, income-producing property — and the collateral package reflects that.
Contractor Bonding
Most commercial construction lenders want to see the general contractor bonded — a performance and payment bond that protects the project if the contractor can’t finish or doesn’t pay subs and suppliers. Bond premiums typically run 1–3% of contract value, often tiered: roughly 2.5% on the first $100,000 of contract value, 1.5% on the next $400,000, and closer to 1.0% above $500,000. Bonding capacity itself is gated by the contractor’s working capital — sureties commonly extend around 10 times working capital as a single-job bonding limit, and they want working capital equal to roughly 5–10% of annual revenue with a current ratio near 1.5 to 2.0. A contractor with thin working capital may struggle to get bonded for the job in the first place, which is one reason bonding and lending requirements end up so tightly linked.
Financial Statements and Backlog
Lenders want current financial statements, tax returns, and — specifically for a general contractor — a backlog schedule showing what other work is already committed and how it’s tracking against budget. A contractor who looks strong on paper but is overextended on other bonded jobs is a real underwriting concern, not a formality.
A Draw Schedule Tied to Project Milestones
Construction loans don’t fund as a single lump sum. Money is released in draws as specific, inspected milestones are hit (site work, foundation, framing, and so on), with the lender or a third-party inspector verifying progress before each draw releases. This protects the lender, but it also means the borrower is often carrying costs between draws, not receiving cash ahead of spend.
A Meaningful Equity or Down Payment Requirement
Ground-up construction financing generally asks for a larger equity injection from the borrower than a typical business term loan or an SBA working-capital loan does, precisely because the lender has no finished, income-producing asset to lean on until the project is done. Exactly how much varies by lender, project type, and the borrower’s financial strength, but plan on contributing meaningfully more equity than you would for most other commercial financing.
Where SBA Financing Fits — and Where It Doesn’t
SBA 7(a) financing is one legitimate route into a commercial construction project: SBA 7(a) proceeds explicitly cover new construction and business expansion or renovation as an approved use of funds, with repayment terms running up to 25 years when real estate is involved. That’s a real option worth exploring, and REIL Capital works with SBA lending partners on 7(a) financing rather than being your only route to it — we help connect qualified borrowers to that process; we don’t underwrite or fund the construction loan ourselves.
What SBA financing doesn’t change is the timeline or the underwriting weight. A standard 7(a) loan commonly takes somewhere in the neighborhood of two to three months from application to funding once appraisal, environmental review, title work, and documentation are accounted for — and it still comes with the same collateral, bonding, and draw-schedule realities described above. If your need is “I have to move on this project soon,” an SBA construction loan is solving a different problem than the one in front of you today.
The Gap a Construction-Perm Loan Doesn’t Close
Here’s the part most searches for “commercial construction loan requirements” don’t surface: even once a construction-perm loan is in place, it typically doesn’t solve the cash-flow squeeze that surrounds the project. Construction is the slowest-paying major industry to collect on invoices — average days-sales-outstanding runs around 83 days, and that’s before accounting for retainage, the 5–10% of contract value routinely withheld until a project wraps. A construction loan’s draw schedule funds the build; it doesn’t cover payroll, materials, or overhead while you’re waiting on your own customers, GCs, or draw-processing delays to pay you. For the full breakdown of why construction payment timing runs so far behind other industries, see our deep dive on the construction 83-day payment gap.
That gap — the working capital squeeze around a construction-perm loan, not the loan itself — is exactly where REIL Capital can genuinely help, even though we don’t originate ground-up construction financing.
What REIL Capital Actually Offers Construction Businesses
To be direct: REIL Capital does not offer a ground-up commercial construction loan or construction-perm product, and we won’t tell you otherwise. What we do offer are two products built specifically for the cash-flow gap that construction businesses run into around a project — whether or not a construction-perm loan is involved.
- Line of Credit (LOC): $25,000–$400,000, with 6–36 month terms. This is the fit for an ongoing, recurring gap — covering payroll and materials between draws or while waiting on retainage release, then drawing it down again on the next job. Eligibility runs 600+ FICO, at least 1 year in business, and $300,000+ in annual revenue.
- Bridge / Working Capital: $5,000–$2,000,000, with funding as fast as 24–48 hours. This fits a one-off need — mobilization costs, a specific labor or materials crunch before a known payment lands — rather than an ongoing revolving line. Eligibility typically runs $25,000+ in monthly revenue, 6+ months in business, and 500+ credit, with stronger approvals for businesses closer to $60,000+ monthly revenue, 3+ years in operation, and 600+ credit.
Applying takes under two minutes, and some products can be approved within 24 hours — though that varies by product and file, so treat it as a realistic possibility, not a guarantee. If you’re weighing a construction-perm loan against your own working-capital needs, our line of credit and bridge financing pages walk through full terms, or you can explore SBA 7(a) financing options if the construction-perm route itself is what you’re pricing out.
The Honest Bottom Line
A traditional commercial construction loan requires collateral, contractor bonding, strong financials and backlog documentation, a milestone-based draw schedule, and more equity than most other business financing. SBA 7(a) financing can fund new construction as part of that picture, arranged through SBA lending partners rather than in-house. What a construction-perm loan generally doesn’t solve is the cash-flow gap around the project — the DSO and retainage timing that construction runs into more than almost any other industry. That’s the piece REIL Capital actually built products for. For the broader picture on financing across the industry, see our construction industry financing hub.
Frequently Asked Questions
Does REIL Capital offer commercial construction loans?
No. REIL Capital does not originate or underwrite ground-up commercial construction loans or construction-perm financing. We work with SBA lending partners on 7(a) financing, which can cover new construction as a use of proceeds, and we offer our own Line of Credit and Bridge/Working Capital products for the cash-flow gap around a construction project.
What does a lender require for a commercial construction loan?
Typically five things: collateral (the land and eventual completed project), contractor bonding, current financial statements and a backlog schedule, a draw schedule tied to inspected project milestones, and a larger equity or down payment contribution than most other commercial financing requires.
Does SBA financing cover new construction?
Yes. SBA 7(a) proceeds explicitly cover new construction and business expansion or renovation, with repayment terms up to 25 years when real estate is involved. REIL Capital works with SBA lending partners on 7(a) financing rather than being your only route to it.
What if I need cash for labor or materials while I wait on a construction loan or a progress payment?
That’s the gap a construction-perm loan generally doesn’t cover. REIL Capital’s Line of Credit ($25,000–$400,000, 6–36 month terms) fits a recurring version of that gap, and Bridge/Working Capital ($5,000–$2,000,000, funding as fast as 24–48 hours) fits a one-off need before a specific payment lands.
