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Understanding 4 Big Construction Risks

Construction lending comes with a lot of risks, so fully understanding those risks is an essential part of every lender's job. Expecting the unexpected and properly preparing for ways to mitigate risks is just one part of a lender's job. Keeping current with the market, the changing practices of contractors, and the risks they both present is the second part. Below are four big risk factors construction lenders should currently be aware of.

  • Material cost escalations

  • Escalation clauses and allowances

  • Global supply chain crisis

  • Labor availability

Despite all the risks, construction projects offer lenders fruitful rewards. Some lenders keep some of the risk mitigation practices, such as fund control, in-house to keep costs down. Electing to self-perform risk management should be a decision based on expertise and capacity.

To read the full article, click the link here:

By Robert W. Barone

Private Lender, The Official Magazine of AAPL

Fall 2022 (Q4), p.32-36

Published on October 4, 2022


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