The quick read: Before a commercial construction lender issues a term sheet, it wants seven document groups: a line-item budget with a contingency line, the general contractor's contract and qualifications, plans and permit status, a construction schedule, the sponsor's completed-project record, proof that the equity is real, and proof the site is entitled for what you plan to build. Federal bank examiners look for the same items when they review construction lending, so a package missing one of them gets priced as uncertain, sized down, or declined.
Who this is for: developers and builders seeking ground-up or heavy-construction financing What this page is: a construction-specific document checklist, not a general loan application list Primary sources: OCC Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0 (March 2022); FDIC Construction and Land Development Lending core analysis procedures (10/25); EPA All Appropriate Inquiries page (updated May 7, 2026) Equity rule to check first: deferred developer's profit and unearned developer fees are generally not considered equity, per the OCC
What documents does a commercial construction lender require before issuing a term sheet?
A commercial construction lender requires seven document groups before issuing a term sheet: a line-item budget with contingency, the general contractor's contract and qualifications, plans and permit status, a construction schedule, the sponsor's track record, evidence of equity, and proof of entitlements. The table shows who asks for each and why.
Table: Construction loan documents that gate the term sheet
| Document | Who asks | Why it gates the term sheet | Red flag |
|---|---|---|---|
| Line-item budget, hard and soft costs, with contingency | Every construction lender; the OCC says a qualified individual should review it | Sets loan-to-cost and shows the loan plus equity funds the project to completion | Lump-sum budget, no contingency line, or interest to equity partners buried in soft costs |
| General contractor contract | Every construction lender; the OCC expects banks to check the contract type | Fixes who carries cost-overrun risk | Related-party builder on open cost-plus with no guaranteed maximum price |
| Contractor qualifications, financials, bonding and insurance | Banks, and any lender requiring payment and performance bonds | The lender is underwriting whether this builder can finish | No completed project of similar size or type; no bonding capacity |
| Plans, specifications and geotechnical report | The lender's construction consultant and the appraiser | The budget can only be checked against real drawings | Schematic drawings only, no soils work |
| Permit status | Every construction lender | No permit, no start, no draws | Permits described as expected, with no application on file |
| Construction schedule and draw schedule | Every construction lender, and the inspector later | Sets the loan term, the interest reserve and each draw | Schedule tighter than comparable projects, no weather or inspection time |
| Sponsor track record and real estate owned schedule | Every construction lender; the OCC says banks should document it before a commitment | Completion risk is sponsor risk until the building earns rent | No completed project of this type, or open problem loans |
| Guarantor financial statements, tax returns, liquidity proof | Recourse lenders | Shows the guaranty is worth something | Liquidity that is pledged elsewhere or cannot be verified |
| Equity evidence | Every construction lender | Equity goes in first and absorbs overruns | Deferred developer fee or developer profit counted as equity |
| Entitlements and zoning proof | Every construction lender | Confirms the building can legally be built as drawn | Pending rezoning, variance or site-plan approval |
| Pro forma, market support, pre-leasing or presales | Every construction lender; the OCC ties preleasing and presales to commitment or funding | Shows the finished building supports the debt | Presales without meaningful deposits |
The list is not a lender's invention. The OCC's Comptroller's Handbook on commercial real estate lending says developers "typically give the bank a detailed line-item budget along with plans, proposed schedules, geotechnical reports, and other supporting documents" that should be reviewed by a qualified individual. The FDIC's construction and land development examination procedures list feasibility studies, minimum equity, global cash flow of borrowers and guarantors, pre-leasing, take-out commitments and contractor performance bonds among the standards a bank's construction policy should address. For how each lender type structures the loan once the package is in, see YieldStack's construction loan overview.
Why does the construction budget decide the term sheet?
The construction budget decides the term sheet because the lender sizes the loan as a share of total cost, checks that the budget funds the project to completion, and reads the contingency, developer fee and soft-cost lines for signs the numbers are optimistic, so a weak budget changes the loan amount before anything else.
Lenders size construction debt on loan-to-cost as well as value. The OCC notes that prudent policies "establish loan limits as a maximum percentage of cost (i.e., LTC) as well as market value (i.e., LTV) to ensure that the borrower contributes sufficient equity." That makes every budget line a leverage decision.
Three lines get read first. Contingency: the OCC says contingency allowances "usually range between 5 and 10 percent of the overall budget," varying with the project's size and complexity. Developer fee: the same handbook says the fee "varies but typically does not exceed 4 percent of the project cost." Soft costs: interest or preferred returns payable to equity partners or subordinate lenders "should not be included in the construction budget."
The FDIC procedures add two expectations worth building in from the start. Cost breakdowns should be prepared "for each phase of development and construction rather than on a total project basis," and cost budgets should "include the amount and source of a borrower's equity contribution and expected profit." A budget that already shows where the equity comes from answers the lender's next question before it is asked.
The pro forma rides with the budget. For income property, the OCC notes that construction costs that closely approach or exceed the value supported by expected net operating income generally indicate a project is not feasible. Send the operating pro forma, the rent or sales comparables it relies on, and any signed leases, letters of intent or presale contracts with deposits.
What does a construction lender need to see about the general contractor?
A construction lender needs the signed or near-final construction contract, the general contractor's record of completed comparable projects, its financial capacity and bonding ability, and its insurance, because the lender is underwriting whether this builder can finish this building for this price, not only whether the sponsor can repay.
The contract type matters first. The OCC says a bank can mitigate cost-overrun risk "by requiring the borrower to enter into a fixed-price contract with the contractor," and that if the borrower and contractor are the same or related, the contract should specify cost plus a fee with a guaranteed maximum price. Whoever builds, the handbook says prudent underwriting generally includes "determining whether the contractor has sufficient expertise and financial capacity."
Bonds come next. The OCC explains that a payment bond protects against liens from unpaid subcontractors and suppliers, a performance bond insures completion, and that "a contractor related to the borrower cannot generally be bonded." If you plan to self-perform, expect the lender to lean harder on your balance sheet and completion guaranty instead.
The contractor file a lender typically wants:
- The construction contract, or the final draft, with the schedule of values attached
- A list of completed projects of similar size and type, with owner references
- Recent financial statements and evidence of bonding capacity
- Certificates of builder's risk, general liability and workers' compensation insurance; the FDIC procedures expect contractors to carry adequate builder's risk and workers' compensation coverage
- The major subcontractor list, since the OCC also expects a review of major subcontractors' ability to complete the work
How do lenders check plans, permits and entitlements?
Lenders check plans, permits and entitlements by having a construction consultant or architect review the drawings against the budget, confirming zoning and site approvals in writing, and asking exactly where each permit stands, because a building that cannot legally start cannot draw, and every month of delay eats the interest reserve.
The FDIC procedures describe legal counsel or other experts, such as an architect or supervising engineer, reviewing building and loan agreements to confirm the improvement specifications conform with building codes, subdivision regulations, zoning and ordinances, title and ground lease restrictions, and flood-program specifications. The OCC's site-analysis guidance covers the same ground from the other side: project type, access, physical dimensions, geologic conditions, easements, utilities and zoning.
What to send, in the order a reviewer reads it:
- Full plans and specifications, not schematics, with the architect's and engineer's names
- The geotechnical report
- A zoning verification letter or the approving resolution, plus any variances or conditions
- The approved site plan and any subdivision or plat approvals
- Each permit's application number, date filed and current status
- Utility availability letters where service is not already at the site
Whether a lender will quote before permits issue varies by lender, so state each permit's status precisely.
What schedule and draw documents does a lender expect?
A lender expects a construction schedule with milestones from permit to certificate of occupancy and a draw schedule that maps budget lines to those milestones, because the two together set the loan term, size the interest reserve, and give the inspector a yardstick for approving each advance once construction starts.
The OCC says the appropriate tenor "is generally based on the time needed for construction and stabilization or sale," and that any extension options should be consistent with the expected construction time plus the projected absorption period. A schedule with no slack produces a loan term with no slack.
The draw schedule is the lender's control document. The FDIC procedures expect banks to compare budget projections to actual costs and draws to degree of completion, and they flag front loading, which the FDIC defines as a practice that "deliberately overstates the cost of work completed in the early stages of construction." A draw schedule that front-loads general conditions or fees is a red flag at the term-sheet stage, not only at draw time. How the schedule, inspections and retainage fit together is covered in how a commercial construction draw schedule works.
What counts as equity evidence for a construction loan?
Equity evidence for a construction loan is documentation that real money or real value is already in the project, such as a land settlement statement, paid invoices for architecture, engineering and permits, and bank statements for cash still to come, and the OCC says a bank's policy should require that equity be contributed before construction loan disbursements begin.
The OCC lists common types of equity as "cash, marketable securities, land purchased with cash, and initial costs paid up front by the developer such as architect and engineering fees and permits." It also says the bank's policy should state that equity be contributed before disbursements of the construction loan commence, and that "deferred developer's profit, unearned developer fees, incurred overhead expenses, or interest or other holding fees paid or accrued on contributed land do not contribute to the value of the project and are generally not considered equity." A guarantor's unpledged assets, the same handbook adds, "should not be considered a substitute for project equity."
Bank lenders also work under a supervisory ceiling. The Interagency Guidelines reproduced in the OCC handbook set a supervisory loan-to-value limit of 80% for commercial, multifamily and other nonresidential construction, 75% for land development and 65% for raw land. Banks are expected to set their own internal limits at or below those figures, and non-bank lenders set their own.
Illustrative example only, not a real deal or a lender's terms:
Illustrative total project cost: $20,000,000 Illustrative loan-to-cost: 65% Illustrative loan: $13,000,000 (65% of $20,000,000) Equity required: $7,000,000 Sponsor's claimed equity: $4,000,000 land bought with cash, $1,500,000 of paid design and permit invoices, $900,000 cash in the bank, and a $600,000 deferred developer fee, for $7,000,000 Equity counted under the OCC description: $6,400,000 ($7,000,000 minus the $600,000 deferred fee) Gap to close before the term sheet holds: $600,000
The fix is either more cash, or a lower budget and with it a smaller loan.
What sponsor and guarantor documents does a construction lender ask for?
A construction lender asks for a schedule of the sponsor's completed projects, a real estate owned schedule, personal financial statements and tax returns for each guarantor, and verification of liquidity, because on a building with no income yet, the sponsor's experience and the guarantor's balance sheet are the only repayment evidence available.
The OCC says that before issuing a commitment to finance proposed construction, the bank should "analyze and document the borrower's background, including experience," and assess whether the borrower has sufficient financial capacity for completion. Its guarantor guidance adds that cash flows should be assessed on a global basis, which can mean business financial statements, tax returns and Schedule K-1 forms across several entities, and that "guarantor liquidity should be verified by the bank."
The sponsor file a lender typically wants:
- A track-record schedule: each completed project's type, size, cost, completion date and outcome
- A real estate owned schedule with debt, maturity and occupancy for each property
- Personal financial statements for every guarantor
- Tax returns, with Schedule K-1s for the entities that matter
- Recent bank and brokerage statements that verify stated liquidity
- The borrowing entity's organizational documents
Expect the guaranty itself to be negotiated. The OCC notes guarantees may be limited to interest, completion, part of the principal, or stepped down as conditions are met, which is a term-sheet point a well-documented sponsor can push on. For how developers position a first or larger project, see financing for developers and builders.
Which reports usually come after the term sheet, not before?
The appraisal, the lender's own construction cost review, the Phase I environmental site assessment and the title work typically come after the term sheet, because the lender orders or engages them once the deal is worth the spend, but having a recent Phase I and a draft survey in hand shortens that stretch.
The appraisal is the largest. The OCC says a construction loan appraisal must include the current as-is value and should include a prospective market value, such as the value upon completion (as complete) or upon stabilization (as stabilized). Those values, not your pro forma, set the loan-to-value test.
The environmental report has its own clock. The EPA's All Appropriate Inquiries page recognizes ASTM E1527-21 for Phase I environmental site assessments and says AAI "must be conducted or updated within one year before the date of acquisition of a property," with certain parts updated within 180 days. The FDIC procedures separately expect banks to consider whether the borrowing entity has conducted an evaluation meeting that rule. A Phase I you commissioned for the land purchase may need updating before closing.
The FDIC procedures also call for a survey before construction and again after the foundation is in place to confirm setbacks. Knowing that sequence early keeps it out of the critical path.
How do you get lenders competing for this construction loan?
You get lenders competing for a construction loan by sending one complete package, budget, contractor file, plans and permit status, schedule, sponsor record, equity proof and entitlements, to several lender types at the same time, so each one prices the same project and the differences in leverage, recourse and reserves become visible.
That is the work YieldStack does. YieldStack is a commercial mortgage brokerage, not a lender. A borrower completes a 5-minute submit, the deal is matched against 20,000+ loan programs, and the aim is a median offer in under an hour, from an institutional lender, as the starting point for negotiation. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
A package built to the checklist above can go to several lender types at the same time.
Submit your construction deal as a guest and compare term sheets
The bottom line
A commercial construction lender issues a term sheet on seven document groups: budget with contingency, contractor contract and qualifications, plans and permit status, schedule, sponsor record, equity proof and entitlements. Federal examiners look for the same items. Check first for equity that the OCC says is generally not equity, such as a deferred developer fee. Build the package to this checklist before the first lender sees it, and send every lender the same package so any term sheets that come back can be compared line for line.