Capital expenditures from builders typically apply in two areas:
- Cash to buy land
- Any financing shortfalls in the vertical construction budget. Our goal is to cover 100% of the vertical construction costs, but when our loan-to-value (LTV) maximums are not enough to cover all of the vertical construction costs, the builder would be required to pay the remainder of those costs out of pocket.
Our program is incredibly cash-flow friendly for our builders. Our builders typically do not bring cash to close since we do not require builder capital contributions or down payments. All fees (settlement, origination, etc) are built into the financing, so most builders do not contribute cash at the close of their construction loan. Snap.Build ® also includes 12 months of interest payments in the financing, so builders don’t make monthly debt-service payments over the 12-month term.
We lend up to a LTV of 75% and an LTC of 95% of appraised value.
The ability to finance land depends on the deal. Snap.Build® is able to include money for land acquisition, provided it is covered by the 75% LTV, and we are able to offer up to 50% of the cost of the land. For land to be covered, it must be entitled and shovel-ready. While we do not offer financing for land that needs to be developed, we have relationships with lenders that do.
At Snap.Build®, we have a two-step approval process for loans to builders. Here’s how our process works:
- Step 1: A one-time approval where we consider the credit-worthiness of the builder. Once we have received a completed builder application form, approval decisions usually occur within a few weeks.
- Step 2: After a builder has been approved, we approve each project individually for land & spec funding as well as new construction funding. This process takes an average of one month to complete, with third-party reports, appraisals and surveys taken into consideration. Once we have the necessary reports, we can underwrite and fund within three weeks.
Yes, we require that all builders use our technology as a part of our lending services. This allows us to offer builders more access to capital, have more starts, do more specs, and grow their business to make more money.