Construction investments can be complex but that shouldn’t deter you from considering them as an option if you’re unfamiliar with the construction process.
With over 27 years of experience we have successfully funded many construction projects throughout New Zealand, from single houses to multiple dwelling developments.
Key Management Practices
We practice the following close management of construction loans ensuring progress aligns with the funding requirement and to mitigate risks:
- Progress Drawdowns (PDDs): Funds are released on the receipt of invoices for work completed. This is usually every 4–6 weeks and based on verified construction milestones. Any delays may be an early indication of issues like labour or material shortages.
- Site Monitoring: Regular visits confirm active work and site upkeep.
- Fund Oversight: We monitor build progress against total costs to detect overspending early.
- Long Term Tracking: We assess loan terms relative to build progress to determine renewal needs.
- Insurance Monitoring: Projects must maintain valid Contract Works Insurance (CWI) throughout the loan term.
Loan Renewal Process
Loans are fixed-term (6–24 months). If a project isn’t complete by term-end, a renewal may be considered based on progress, updated costs and valuations, and reasons for delay.
Renewing a construction project loan is the best strategy to ensure the project is completed and the exit of refinance, or sale of the properties, realised.
Funding Construction
At SCP we are conservative lenders, this means we conduct our due diligence to ensure the building projects we lend on have the best chance of completion.
Below are just some of the things we look for to make sure the construction project will be completed:
- Fixed-Price Contracts: Required from reputable builders, with cost per m² reviewed. We may also investigate previous build projects completed by the builder.
- Contingency: A percentage buffer, on average 10%, is added to cover overruns; clients are responsible for variations.
- Loan Amount: Sufficient funding has been requested based on the completed project’s value (less GST) and this fits within SCP LVR preferences.
- Valuation: An As-Is and an As-If completed value supplied by a registered valuer. LVR is based on the completed value.
- Due Diligence: Applications must outline the borrower’s situation, exit strategy, and desired LVR.
Loan repayment process - Partial repayments
In most cases the construction loan is repaid upon the sale of the completed properties.
This is how these repayments are managed:
- If there are multiple dwellings being built these could sell at different items to end purchasers.
- Funds for each sale partially repays the loan balance and must be distributed to investors equally based on the percentage of the loan they have invested.
- The exact amount of the payment may not be known at the time SCP is advised, therefore investors are only notified once funds have been received.
- Investors can find the exact amount they have been repaid in the On Call account tab of the My Investments section on the portal.
- Loan funds can be repaid at any time with limited prior notice to SCP.
Investor Access
Investors can monitor loan progress via the portal, which includes milestone updates and project status.
Progress payments are made available on the portal for further investment throughout the life of the loan, upon verification through photos, inspection reports, or site visits.
With our proven track record, rigorous oversight, and commitment to transparency, SCP continues to be a trusted partner in ensuring construction investments are secure, well-managed, and positioned for success.