Construction Lending for Community Banks: Saying Yes to the Contractor You Just Declined
Construction lending for community banks puts most credit committees on edge. The reasons repeat. Retainage. Progress billing. Change orders. A balance sheet that swings on one bad job. Project risk that sits outside what your loan officers underwrite. So you decline the contractor, and a customer you have banked for years starts shopping.
That contractor is financeable. Their receivables are real and their customers pay. A bank just measures them the wrong way.
A subcontractor with a thin balance sheet still works under creditworthy general contractors, with real money standing behind active jobs. The risk sits in the project chain, not the company. You manage it by underwriting the chain, verifying the work, and funding the receivable.
Construction Lending for Community Banks, Minus the Division
That underwriting takes a construction specialist. Reading the owner, the general contractor, and the sub. Checking payment history across the parties before a dollar moves. Watching progress billing and retainage. Most community banks staff that desk for a handful of contractor relationships about once a decade, which means almost never.
A factoring participation hands the bank that desk. The facility books in your name. Your customer stays your customer. We run the construction underwriting, verification and servicing behind you, on more than 30 years of construction factoring and five credit databases checked on every job.
The economics track the rest of the partnership. You participate at 50/50 on a facility priced for the work it demands. Your outstandings climb. Your fee income climbs. And the contractor walking out the door turns into an asset you own half of, on a job you could not have booked alone.
The alternative plays out right now. The decline goes out, the relationship leaves, and the contractor funds the job through a merchant cash advance or the bank two counties over.
Bring us the contractor customers you keep turning away, and we will look at your decline file together.