Commercial real estate construction projects, even small ones, occur over a length of time, usually 12 to 24 months. This long process exposes the bank to risks it cannot control: weather, interest rate increases, supplier difficulties, and, of course, the usual industry, business, and management risks. At community and small regional banks, staffs working in traditional credit risk are required to accomplish the task of administering and monitoring construction lending without the aid of a specialized real estate staff. Additionally, administration of the loan depends on more than the bank's policies and procedures—it also is influenced by the conditions of the approval, the commitment letter to the customer and the elements of the construction loan agreement.
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