The Miami contractor attorneys at Cotney Construction Law are intimately familiar with conflicts that transpire between contractors and owners when it comes to financing arrangements for construction projects. In parts one, two, and three of this four-part series, we introduced the various types of financing and institutional arrangements commonly utilized in the construction industry. In this final installment, we will examine an array of options for financing plans and arrangements that every contractor should be cognizant of when working with a private owner.
Utilize Corporate Equity and Retained Earnings
Projects financed by owners committing corporate resources to drive construction directly would most likely avoid working with other institutional parties interested in getting involved with your project as a stakeholder. Nonetheless, if the corporate funds are short of supporting the total cost of construction, a third party financier could be considered.
Construction Loans and Long-Term Mortgages
This option requires the owner to obtain a loan from a bank or other financial institution to procure funds for the construction project. Once construction has concluded, the building will be sought out by institutions aiming to supply mortgage or long-term funding for the completed project. A financing plan like this requires a combination of short- and long-term lending, which can demand separate lenders. This plan can then be supplemented with other sources of funding such as corporate retained earnings, or by reaching out for assistance from a local development agency.
Lease the Building from a Third Party
In this option, the private corporation you have partnered with would lease space in a constructed or partially constructed building. The developer of the existing building would then take on the responsibility of arranging construction for the corporation as needed. In this case, the owner can minimize the amount of borrowed funds while still influencing certain design aspects of the building.
Initiate a Joint Venture with Local Government
Depending on where you live, your local government may offer financial assistance to local companies that possess an enterprising spirit and a desire to grow. For example, local governments may help ease the burden of financing for your client who wishes to construct a new headquarters. This type of help comes in many forms, most commonly:
- Assistance in assembling property
- Low-interest loans
- Property tax reductions
- Enforcing “eminent domain” to acquire necessary plots of land
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.