How 90% LTC Financing Actually Works on a Commercial Ground-Up

High-leverage construction financing is real — but it's the bank's money, the bank's underwriting, and the bank's decision. Here's how loan-to-cost works on a ground-up commercial project, what a draw schedule actually does, and why Pereff facilitates the relationship instead of lending the money.

When a developer hears 'up to 90% loan-to-cost,' the natural assumption is that the contractor is handing out money. We are not. Pereff is a commercial general contractor and a real estate developer — not a bank. What 25+ years of completed projects and bank-underwriter relationships actually buy you is access: we know which lenders underwrite ground-up commercial deals at high leverage, we know what they need to see, and we know how to package a project so the answer is yes. The capital is theirs. The credit decision is theirs. Our job is to get a fundable deal in front of the right desk — and to build the project to the budget the loan was written against.

LTC vs. LTV — the distinction that determines your equity check

Before you can understand a 90% loan, you have to understand which number the 90% is measured against. The two ratios that matter on a ground-up project are loan-to-cost and loan-to-value, and they are not interchangeable.

• Loan-to-cost (LTC) = loan amount ÷ total project cost. Total cost is land + hard costs + soft costs + financing carry + contingency. A 90% LTC loan means the lender funds 90% of what it costs to build, and you bring 10% as equity. This is the metric used during the construction phase.
• Loan-to-value (LTV) = loan amount ÷ stabilized appraised value of the finished, leased-up building. Value is usually higher than cost on a well-located project, which is why permanent and agency loans lean on LTV. This is the metric used after stabilization.

Why it matters: on a ground-up commercial deal, your out-of-pocket equity is driven by LTC, because there is no stabilized value yet — there's a hole in the ground and a set of drawings. At 65–80% LTC, the conventional range, a $5M project requires roughly $1M–$1.75M of developer equity. At 90% LTC, that same project requires roughly $500K. The leverage difference is the difference between a deal that pencils and one that sits on the shelf.

What the bank actually underwrites on a ground-up

A construction lender is not betting on the building — they're betting on whether the building gets finished, on budget, and produces enough income to service the debt. That belief gets built from a specific set of inputs. The more of these you de-risk before the application, the higher the leverage a lender will extend.

• The sponsor. Your credit, net worth, liquidity, and track record. First-time developers face a higher equity requirement and more scrutiny than someone with completed projects behind them — the lender is underwriting the person as much as the dirt.
• Hard-cost certainty. A Guaranteed Maximum Price (GMP) or a fixed-price contract from a credible builder is the single biggest factor in how comfortable a lender gets. Cost overruns are what blow up construction loans, so a budget the bank believes is the foundation of high leverage.
• The pro forma. Total project cost vs. stabilized value vs. projected net operating income. Lenders typically want a debt service coverage ratio (DSCR) of at least 1.20–1.25x — meaning income covers the debt payment with margin to spare.
• Market and exit. Comparable rents, absorption, and a credible path to stabilization or sale. The lender wants to know how the loan gets repaid — refinance into permanent debt, or sale.
• Collateral and guarantees. The land and improvements are the collateral; most construction loans are recourse to the sponsor unless the project qualifies for a non-recourse program (more common in HUD multifamily than conventional ground-up).

The draw schedule — how the money actually moves

A commercial construction loan does not hand you a lump sum on day one. It funds in stages against completed, inspected work — a process called the draw schedule. This is the mechanic that surprises developers who have only done permanent financing, and getting it wrong creates cash-flow gaps that stall projects.

• Work gets done, then funded — not the reverse. The contractor performs a portion of the work (foundation, framing, MEP rough-in), then submits a draw request with documentation. The lender's inspector verifies the work is in place before releasing that draw.
• Interest-only during construction. You pay interest only on the funds actually drawn to date — not the full loan amount — which keeps carry manageable while the building is going up. The loan typically converts to amortizing payments at stabilization.
• Retainage. Lenders and owners commonly hold back a percentage (often ~5–10%) of each draw until the project is complete and closed out, as a hedge against non-completion. The contractor finances that gap until final payment.
• Lien waivers and inspections gate every draw. Subcontractors sign lien waivers confirming they've been paid; the inspector confirms progress. A clean, well-documented draw package keeps the money flowing on schedule — a sloppy one creates delays that ripple through the whole job.

Construction-to-permanent: one close, no re-qualifying

On many ground-up deals, the smartest structure is a construction-to-permanent loan — sometimes called a 'one-time close.' Instead of a short-term construction loan that you have to refinance into permanent debt at stabilization (re-qualifying, paying a second set of closing costs, and taking interest-rate risk on the refinance), the construction and permanent phases are rolled into a single loan with a single closing.

• You lock terms once, up front — removing the risk that rates move against you between construction completion and permanent financing.
• You pay one set of closing costs instead of two.
• You avoid re-qualifying at stabilization, which matters if your financial picture or the lending market shifts during the build.
• Qualifying programs can carry interest-only during construction that self-amortizes in the permanent phase, with the rate locked prior to construction. (Availability and terms are lender-specific and project-specific.)

Where Pereff has done this

On the healthcare side, Pereff's bank facilitation secured 100% financing including soft costs for Dr. Sheppard's ground-up oral surgery facility in Mansfield (8,272 sf, $3.1M) — a deal closed during a government shutdown that disrupted normal bank timelines. On the multifamily side, Highland Crossing Luxury Apartments (250+ units, ~$15M total deal) was structured as a HUD AAA credit-enhancement insured loan, the most complex multifamily financing instrument available, which Pereff navigated as both developer and builder. Different programs, different leverage mechanics — but the same underlying capability: relationships with the lenders who do these deals, and the hard-cost certainty that makes a high-leverage application fundable.

The honest version of the pitch

High-leverage construction financing is not a gimmick and it is not a guarantee. It is the product of a fundable project, a credible sponsor, a budget a lender believes, and a relationship with the right desk. Pereff brings three of those four to the table — the design-build process that produces hard-cost certainty, the developer-grade pro forma, and 25+ years of bank-underwriter relationships. The fourth, your financial profile, is yours to bring. When the four line up, the equity check on a ground-up commercial project can be a fraction of what conventional lending requires.