Modular construction is saving the industry up to 22 billion dollars due to increased efficiency in assembling modular elements on construction sites. Even though modular construction is becoming a trend in the industry, lenders are having issues with understanding the profitability of modular construction projects. That is how a loan for such a project may be turned down, mostly because the territory of modular construction is yet unfamiliar to lenders and financial officers. How to finance modular construction projects and tackle these issues.
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Modular Construction Financing and the Problem of Adoption
Modular construction is being rapidly adopted as a trend, but not fast enough to convince lenders to get on board. Modular construction doesn’t fit into the financing programs for construction according to loaners, which is why loans are rarely given for such projects. Only 5% of construction accounts for modular construction despite numerous advantages in terms of cost-efficiency and eco-friendliness. The trend is still in the early stage of adoption, although prominent. That can be the reason why getting a loan for modular construction projects may be difficult in the majority of cases.
Thinking Beyond Traditional – Financing Modular Construction
Some contractors and project owners have tried non-traditional methods for financing modular construction, and these methods turned out to be viable. Banks may have problems with financing these types of projects, however, non-bank lenders, debt funds, and real estate investment funds may be the answer for many contractors. These lenders can provide the needed financial support in the form of a loan understanding the market opportunity. Modular construction is progressing although, in the early stage of development, so many non-traditional lenders and service providers may grant loans for modular construction projects. Lenders ma secure themselves by tracking the production of modular elements as well as tracking the progress and needed regulations for a construction site where these parts would be assembled.
