Construction financing

Construction funding: the numbers to separate.

Keep project cost, property value, total commitment, initial funding and holdback distinct.

Educational guide · 5 min read · Published by Palermo Financial Group · Updated October 7, 2026

Separate project cost, current and completed value, total commitment, the initial advance and the future-advance holdback. State the assumptions for each figure before comparing financing structures.

Project cost is a budget.

For a useful construction discussion, identify land or existing property cost, hard costs, soft costs and contingency. State which items are included. A budget excluding financing and carrying costs needs a separate plan for those amounts.

Property value is a different basis.

A current value describes collateral at its present stage. An as-completed value assumes the planned work has been finished. Label each clearly and do not use a projected finished value as though it were a verified value today.

A commitment includes future availability.

An agreed total commitment can include initial funding and a portion reserved for later advances. In a simple illustration, a $1,200,000 commitment consists of $400,000 initially funded and an $800,000 holdback. Those pieces add to the commitment; they are not three separate loans.

The borrower contribution closes the budget.

If the simplified total project cost is $1,800,000 and the commitment is $1,200,000, the budget difference is $600,000. The timing and permitted sources of that contribution matter. Costs outside the stated budget require additional capital.

Future advances depend on the actual documents.

Draw requests, evidence of progress and applicable conditions are governed by the agreed structure. The educational example does not promise that a particular schedule, amount or property will qualify.