As the old saying goes, with no risk, there’s no reward.

To be sure, commercial construction lending can be risky. Indeed, the sector isn’t easy in the best of times because of its complex, multi-faceted process, often peppered with overruns, delays, and missteps. Now half-way through Q4, amidst the lingering effects of COVID-19, most commercial construction lenders are reeling and needless to say, caution is recommended given the uncertain and unpredictable future.

Having experienced the lockdowns in the second quarter of 2020, the vast majority of commercial lenders responded admirably to this “new normal.”  Some pulled back to wait the virus out, while others froze and took a hit as the pandemic lingered and a few increased lending activities with major risk. However, now, with more states eying stricter measures to prevent an additional spike in positive test results, it seems lenders may need a crystal ball in addition to a high-powered calculator to assess a deal and its potential success.

Going forward, projects must be thoughtfully and carefully evaluated. During this time, commercial asset classes that demonstrate resiliency include multifamily rentals and industrial properties with some lender appetite for office buildings in the suburbs or those with strong credit tenants. Clearly, in the era of Covid-19 and beyond, the importance of the feasibility process cannot be understated. Whether your team is working in the office or remotely, your processes must adapt to the new environment.

Presently, primary areas directly affected include construction materials and subcontract labor. Due to low mortgage rates and an increase in the housing sector’s supply and demand, material costs are up sharply year over year, and labor is an even bigger challenge.  It’s quite possible some subcontractors may not make it through a possible second wave of the virus. Thus, an extensive analysis of prospective budgets will significantly reduce your risk.

At Trinity Commercial Services (TCS), we want to help. Our commercial budget review report considers all of these factors, so you can evolve and expand your business during and post. A budget review evaluates the data and presents a definitive opinion on whether or not the presented project budget is achievable. In most instances, we isolate potential issues and provide your firm with a list of clarifications, which you may address with the borrower and potentially salvage some business you may have passed on during the onset of Covid-19. Ultimately, our job is to help you review the opportunity, mitigate your risk, and help you reach that reward.

As we steer the waters of 2021, not only must we evolve – we must expand. In this triangular business model, our customers, our associates, and our principles require it. Are you ready?