Eight Construction Loan Monitoring Reports That Crush Risk

Construction loan administration is filled with risk. Manual data entry, spreadsheet versioning issues, and missing paperwork can easily slip through the cracks. Many loan administrators use construction finance software to ease the burden of searching for potential risk. Software can assist in catching several potential errors, such as:

• Over Capacity
• Project Delays
• Geographic and Asset Class Risk
• Inefficient Employees, Vendors, and Builders
• Fraudulent Activity
• Cash Flow
• Suspicious Line Items
• Change Orders
• Slow Payments that Lead to Liens

Construction finance software like Rabbet can read and reconcile draw documents, identify errors, and provide intelligent recommendations to cut down on administrative tasks. At the same time, it helps to ensure compliance and reduces liability for everyone involved. Construction finance software can empower capital partners with faster disbursements, incremental earned interest income, and lien-free completion of projects.

Today we’re going to focus on the analytics and insights necessary to quickly identify opportunities and to limit exposure for construction capital partners and borrowers. This type of vital visibility into a portfolio of loans and projects serves as a competitive differentiator for construction loan administrators, lending institutions, and project owners.

Eight Construction Loan Monitoring Reports That Crush Risk

Consolidation of Portfolio Level Data
A Portfolio Overview Report offers a look at your portfolio’s overall status including pending draws, loans outstanding, and total loan commitments including the types of loan projects across your entire portfolio like Commercial, Custom Home, Lot Development, SBA, and more. This type of portfolio reporting also offers a visual of project completion status so you can measure risk and capacity at a glance.

A Portfolio Composition Report details the types of projects, locations, loan and project sizes, and more; all factors used for assessing geographic and asset class risk. This report also shows the percentage of project completion based on the asset class.

Project Level Vantage Point
A Project Level Report provides project performance details in an easy-to-read and follow visual dashboard. This report provides a breakdown of the most critical project elements to help make operational decisions, maintain a strict timeline, and mitigate risks well in advance of them becoming an issue.

Within this report, you can expect to see a breakdown of budget elements including percent complete, requested, and contingency used, as well as the overall funding schedule to keep tabs on whether or not the project is ahead or behind schedule.

Project details contained in this report outline the number of draws remaining, total invoices to date, and the project total. This report also provides a history of all draws by date, the amount requested and the amount paid.

The individual draw breakdown section of this report provides a status update, alerts to missing documents and workflow steps, pending activities in need of authorization/signatures, and all of the individual draw documents.

Finally, this report dashboard provides a visual timeline of how all stakeholders are engaging with the software and project including a list of recent documents and activity.

Expedited Draw Processing
The Draw Processing Report is a comprehensive overview of all aspects relating to construction draws in a specified period, such as approval dates, days to process, dates of funds withdrawn, and more.

A capital partner using Rabbet recently discovered through their Draw Processing Report that the time to process draw packages went from 19 days on their first draw down to 1.6 days on their most recent draw. This is an example of how quickly lenders and borrowers adopt construction loan software and how they immediately begin to realize efficiencies.

This report also lists which employees, vendors, and builders are most efficient and creating the most profit for your institution. For example, does inspector A have a faster turn-around time than inspector B; does borrower B provide more accurate draw packages than borrower A?

Loan Payment Progress
A Loan Payments by Division Report breaks down all draw requests by project and type of cost over a specified period. Tracking this information goes a long way to prevent fraudulent activity by monitoring labor, supplies, and material costs; cash flow; suspicious line items; and change orders.

This report also enables lenders to track progress and per-square-foot costs on different line items in their projects. Say, for example, a capital partner wants to know how much they pay for framing per square foot on commercial projects in Dallas. This report would show them that.

Cash Equity Position
A Cash Equity Over Time Report tracks the equity contributions and requirements per loan over time. This enables the monitoring of HVCRE requirements and equity contributions to ensure loan equity requirements are met and appropriately monitored.

Lien Release Management
A top pain point for many construction loan administrators is how to monitor lien activity and link the release of liens to payments. In our recent study, we found that 82% of contractors report waiting over 30 days for payment, leading to significant financial strain. With these odds, the risk of a lien delaying the completion of a project is higher than ever. Feel free to download the 2024 Construction Payments Report for more detailed insights into the current state of construction payments and solutions to streamline the process.

A Lien Releases Report is used to track the status of conditional and unconditional lien releases for every invoice broken out by the project over a specified timeframe. The report prevents issues from falling through the cracks by digitizing a process once managed through email and Excel spreadsheets.

Retainage
A Retainage Report tracks the retainage status and “withheld to date” for every line item broken out by the project over a specified time. In this report, you can see which line items are having retainage reduced on all projects. This report provides visibility into where exposure risks may lie.

Interest Reserves
An interest reserve account may be in place to pay interest on itself using borrowed funds. The interest is determined by the expected rate during construction as well as the planned construction period, the beginning loan balance, and the final construction loan amount.

The Interest Reserves Report provides interest activity by project name, including the total amount of interest in reserves, interest reserves used and remaining, total loan amount, and loan drawn amount.

Conclusion

In conclusion, construction finance software is transforming the way capital partners manage risk and streamline their construction loan monitoring. By utilizing advanced technology and automation, these tools can reduce errors, speed up draw processing, and provide critical insights into project performance. The ability to proactively mitigate risks such as delays, inefficiencies, and fraudulent activities makes construction lending more secure and efficient for everyone involved. For capital partners looking to stay competitive and improve their bottom line, adopting this technology is no longer optional—it’s essential.