Many builders have experienced the pressure of securing funding for a development that’s coming up fast, making decisions quickly, agreeing to rate and term concessions, and absorbing the impact on project margins and returns.
It’s like trying to make last-minute vacation plans, according to Ken Frisbie, Central U.S. head of institutional originations at Anchor Loans. “The options for the destination and accommodations are fewer, the costs are greater, and the experience is less enjoyable,” he says. “The same goes for when you wait until the last minute to fund a project: The lending options are fewer, it costs you more, and it’s not nearly as fun to run your business.”
This is even more true in an environment where credit conditions on residential land acquisition, development, and construction loans have been tightening for years.i “All lenders are scrutinizing deals more closely than a few years ago,” Frisbie says. This more rigorous vetting process increases the value of planning ahead.
The cost of waiting extends well beyond incremental interest expense: less attractive terms, reduced negotiating leverage, financing that tightens margins, and lost growth potential that compounds across the pipeline.
Builders who plan early and think strategically across their whole portfolio aren’t just solving short-term funding needs— they’re creating greater flexibility in how capital is deployed across the business.
Pipeline Versus Project-by-Project Thinking
Financing projects with several different banks means managing multiple sets of requirements, concentration limits, and underwriting processes. Consolidating with a single lender simplifies the process.
But the benefits go farther than paperwork reduction, Frisbie says: “If sponsors can simplify their capital sourcing across their multiple projects with fewer lenders, it enables them to think strategically across their whole portfolio in a more streamlined and efficient manner.”
Builders who treat capital planning as a strategic function engage financing partners well before capital is needed, creating greater flexibility in how they structure and deploy capital across the pipeline. “Advanced planning allows them to secure financing when their position is stronger, rather than when liquidity pressures are mounting,” Frisbie says.
Higher Leverage and Unlocked Equity
Traditional lenders may offer lower leverage, requiring builders to contribute more equity to each project. Private lenders can offer higher leverage, allowing the same equity pool to support more projects simultaneously. “The equity that might be required for one project with a bank could possibly be spread across multiple projects with us,” Frisbie says.
Banks may also restrict how much exposure they have in entitled land that hasn’t gone vertical yet; private lenders typically have more freedom, which can be an advantage for land-heavy pipelines. “We don’t have the same limitations as long as the land is being developed,” Frisbie says.
Putting Trapped Equity Back to Work
In a recent example, a sponsor had a $15 million construction loan with a traditional bank at 60% LTC. Their inability to access additional equity was limiting their growth potential. “They wanted a loan solution to finance the rest of their project while releasing some of that equity that was effectively trapped,” Frisbie says.
Anchor Loans proposed refinancing the loan into a $60 million facility at 80% LTC that would unlock $8 million in equity at closing. “We were able to structure it and still be competitive on rate, so it would be a trifecta win for them: delivering a higher loan amount, getting liquidity back to the sponsor, and doing it at a rate that still allowed them to hit their modeled returns.”
The structure also created the potential to apply the same approach more broadly. “It opened their eyes to how we could do this more programmatically with them across their portfolio of other projects.”
Evaluating the Full Cost of Capital
For builders accustomed to bank financing, private lending’s slightly higher rate can initially look like a dealbreaker. “If they’re focused on a single project’s rate and terms, it might feel good to get a great rate,” Frisbie says. “They’re not factoring in the cost of equity locked up in a lower-leverage loan.” At lower leverage, builders must contribute more equity to a project that can’t be redeployed, whereas “the weighted cost of their capital stack at higher leverage is generally accretive, not prohibitive.”
That broader cost-of-capital analysis can change the equation, Frisbie says. “By going just a little bit higher on rate but increasing the leverage from 60% to 80%, they avoid the cost of that additional equity they had to raise for the traditional bank scenario.”
Structures That Go Beyond the Single Deal
When Anchor can see a builder’s full pipeline rather than a single deal, two options become available that offer advantages over project-by-project financing.
The first is a programmatic facility—a commitment to fund a series of projects at pre-agreed terms. “We can consider putting them in a scenario where they’re just onboarding projects as opposed to re-underwriting a brand new loan each time,” Frisbie says. This structure gives Anchor a broader view of their pipeline, enabling a more consultative relationship. “Sometimes they might even change the order of their projects if we can show them how to get more bang for their buck.”
For builders with the latitude to cross-collateralize their projects, a more sophisticated option could be Anchor Loans’ home builder production facility, a revolving line of credit that finances multiple projects under a single structure. As projects progress, equity is released and redeployed much more efficiently across the pipeline—at the portfolio level, rather than just one deal at a time.
Unlocking Full Portfolio Potential
Both structures require Anchor Loans to understand the builder’s complete picture upfront, which is why early engagement benefits the borrower as much as the lender.
Builders who view private capital as a single-project solution may be overlooking what’s possible with a creative, consultative approach. With proper lead time and full pipeline visibility to act on, the right lender can be a strategic partner helping them reenvision how they capitalize the whole business. That’s the ultimate benefit of early planning.
To explore how Anchor Loans can help you build a capital strategy around your projects, visit anchorloans.com.
