Delays.
Conditions.
Endless documentation.
Last-minute pullbacks.
It’s not personal.
Banks hate construction loans — and the system is built that way.
Private lenders, on the other hand, were designed for them.
Construction Loans Break the Banking Model
Banks are structured to lend against certainty:
Finished properties
Predictable cash flow
Stable collateral
Long-term amortization
Construction loans offer none of that.
They involve:
An unfinished asset
Changing value over time
Draw schedules
Cost overruns
Timeline risk
Market exposure
From a bank’s perspective, construction lending is high effort, high monitoring, and high friction — with little upside compared to a standard mortgage.
Why Banks Say “Yes”… Then Say “No”
Many builders and investors hear initial interest from a bank, only to hit walls later.
Here’s why deals collapse mid-process:
1. Too many internal approvals
Construction loans require multiple sign-offs — credit, risk, compliance, and often head office. One concern can kill the deal.
2. Zero tolerance for deviations
If your build runs late, costs more, or changes scope, banks often freeze funding — even when the project remains viable.
3. Rigid draw rules
Banks release funds slowly and conservatively, creating cash-flow pressure on active sites.
4. Market fear
Banks pull back fast when markets soften — construction is usually the first category to get cut.
This is why builders often say:
“The bank approved it — until it mattered.”
Why Private Lenders Are Built for Construction
Private lenders don’t see construction as a problem.
They see it as a process.
Private construction financing focuses on:
Land value
As-completed value
Loan-to-value at each stage
Builder experience
Exit strategy
Not rigid boxes.
This makes private capital far more adaptable to real-world construction timelines.
How Private Construction Loans Actually Work
Unlike banks, private lenders expect movement and change.
They structure loans with:
Draw-based funding aligned to milestones
Flexible timelines
Site inspections, not endless committees
Clear exits (sale, refinance, takeout financing)
The goal isn’t perfection — it’s completion.
Who Uses Private Construction Loans in Canada?
Across Canada, private construction loans are commonly used by:
Custom home builders
Infill and small developers
Investors doing major renovations
Landowners converting value
Borrowers bridging to CMHC or bank takeout
In many cases, private financing isn’t the fallback — it’s Phase One of a larger capital plan.
The Biggest Myth About Private Construction Lending
The myth: “Private loans are risky.”
The reality: Poor planning is risky.
When structured correctly:
Private loans are short-term
LTVs are conservative
Capital is monitored closely
Exits are defined upfront
The risk often comes from not having funding certainty, not from the lender itself.
Construction Needs Capital That Moves
Time kills construction projects faster than interest rates.
Missed draws stall trades.
Delayed funding inflates costs.
Frozen capital destroys momentum.
Private lenders understand one thing banks don’t prioritize enough:
A project that keeps moving is safer than one that stops.
The Bottom Line
Banks hate construction loans because they don’t fit a mass-market system.
Private lenders don’t — because construction is exactly where flexible, asset-based capital works best.
If you’re building, renovating, or developing, the question isn’t “Can the bank do this?”
It’s “Who understands how construction actually works?”
About Lendworth
Lendworth provides private construction and infill financing across Ontario, structured around draw schedules, timelines, and real exit strategies — not rigid banking formulas.
Your equity deserves more™.