Mitigating Risk in Your Construction Projects

Apr 8, 2024

In the business of commercial construction lending, risk mitigation is a top priority. Lenders run the risk of losing some, most, or all of the loan they granted.

Construction is complex and most projects see various ups and downs; changes in budget, schedule, or staff and delays can arise due to these changes, weather, permitting issues, rework, and more. Throughout a project’s life cycle, however, the goal for all parties involved remains the same: complete the project on time, on budget, and turn a profit. As lenders, you want to be reimbursed as quickly as possible. There are several ways one can minimize cost from a construction management perspective, but what can lenders do to reduce the risk on construction loans?

Work with a Construction Loan Monitoring Professional

Work with a Construction Loan Monitoring (CLM) project manager from the start of the project. EBI’s experienced CLM professionals can conduct an up-front cost and plan review, provide ongoing monitoring during the construction phase, and closeout the project, you have a greater chance of minimizing additional costs. This allows for early detection of issues allowing for proactive management to address issues before they escalate.

Hiring an experienced construction professional prior to the start of a project to identify any potential red flags decreases the chances of costly mid-project changes. Upfront assessment of project plans by an experienced construction professional can minimize costs in the long term. Having this expert centralize progress monitoring and quality assurance can greatly assist in keeping project budgets and timelines on track

Hire a Project Manager

Hiring a project manager to track project schedule, materials, budget, and documentation can help avoid project obstacles, and project managers can also assist in mediating any obstacles that occur. A project manager is the lender’s eyes and ears on a project from start to finish, particularly when hired to complete an up-front construction plan and cost report (CPCR) in addition to monthly construction monitoring reports (CMRs) and ensuring proper progression and successful completion of milestones. Working with such construction professionals when considering a loan agreement assists in ensuring the timeliness of a project, and thus the return on investment on any loan.

Pre-Construction and Construction Due Diligence

Before moving forward with a construction loan, comprehensive due diligence on the project should be performed. The following services can provide critical insight into a project’s potential risks, provide peace of mind, and help avoid future fines and roadblocks down the line:

      • Facility decommissioning
      • Demolition oversight
      • Soil pre-characterization for pre-construction strategies
      • Construction-related remediation specifications and contingency plans
      • Soil and Dewatering Management Plans
      • Underground storage tank (UST) and aboveground storage tank (AST) decommissioning and closure
      • Contaminated soil characterization, management and disposal
      • Construction dewatering permitting, management, and disposal
      • Remediation system design, installation, operation and maintenance
      • Design and installation of sub-slab depressurization systems (SSDS)
      • Air, dust and noise monitoring
      • Environmental health and safety

Your Partner for Project Excellence

EBI Consulting’s Construction Loan Monitoring (CLM) team consists of experienced construction professionals with expertise in construction lending. Our project managers work diligently to facilitate an on schedule, on budget construction process, and prioritizing the client while keeping all involved parties in mind.

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