There are two major categories of risk associated with commercial construction lending - construction risk and market risk. Today we will talk about construction risk. Construction risk is the risk that the project will not get completed on on-time and on-budget. A lot of things can go wrong during construction. There could be a delay in getting supplies. Right now, because of all of the reconstruction going on in New Orleans and on the coast of Mississippi, building materials are in short supply. Contractors are reporting long delays in receiving plywood and windows. Another construction danger is a labor interrruption. Powerful trade unions have been known to strike during the construction of huge projects because the developer is particulary vulnerable when he is carrying a one hundred million dollar construction loan. Weather and fires are always a serious risk. An early winter or a particuarly rainy spring can delay construction by many weeks. Vagrants often move in to partially completed buildings and start small fires to keep warm. These fires can spread out of control. Cost overruns are common in construction, particularly right now. Contractors everywhere are defaulting on their fixed price bids because of unexpected increases in construction materials. Thousands of projects under construction in America are coming in 20% to 30% higher in cost than originally projected because of the skyrocketing cost of oil and building materials. Steel and cement have soared in price in recent years because of all of the new construction going on in China. Environmental risk is serious too. Suppose a leaking underground storage tank (UST) is discovered during demolition? The cost to remediate a leaking UST can be hundreds of thousands of dollars. Sometimes environmental activists can bring a construction project to a halt because of the sudden discovery of some endangered species. The lender who assumes the construction risk is the construction lender, who is normally a lender local to the area. You can find hundreds of commercial construction lenders on C-Loans.com. | 
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