Commercial Construction Loans in Minnesota

Financing for developers, investors and owner-occupants building across the Twin Cities and Greater Minnesota.

Commercial construction financing for Minnesota developers, investors and owner-occupants. You have the land, the plans and the approvals. We provide the construction loan, the draw schedule that keeps your contractors paid, and a lender who decides here.

Talk With a Commercial Lender See All Business Financing

Building a home rather than a commercial project? This page covers commercial construction lending. For a house you plan to live in, see new home construction and renovation loans or read our guide to construction loans in Minnesota.

Decided locallyYour lender walks the site and takes the deal to committee here.

Draws that moveMonthly draw processing that keeps subcontractors paid on schedule.

Through to permanentConstruction into mini-perm, arranged at the start, not at the end.

21 locationsTwin Cities metro and Greater Minnesota.

What a commercial construction loan is

A commercial construction loan is a short-term, secured line of credit that funds a building project as it is built, rather than in one lump sum at closing. The loan is set up as a straight line of credit, sometimes called a draw line. The commitment amount is fixed and re-advances are not allowed, so every dollar drawn is a dollar of the total budget spent.

You draw against it as work is completed and verified. You pay interest only on the balance you have actually drawn, not on the full commitment. When construction is complete and the certificate of occupancy is issued, the loan either pays off from a sale or a permanent lender, or converts to a mini-perm loan with principal and interest payments.

The real estate itself secures the loan. That is what makes it a construction loan rather than a general business loan, and it is why the appraisal, the budget and the contractor all get reviewed as closely as your financial statements do.

Projects we finance

As relationship lenders, our borrowers lead the way. These are the project types we have financed across Minnesota.

Owner occupied

Building for your own business

Industrial and manufacturing facilities
Retail and showroom space
Office buildings
Expansions and additions to a building you already own

If your business will occupy the building, the project is underwritten on your operating cash flow as well as the real estate.

Investor owned

Building to lease or sell

Industrial, retail and office buildings
Downtown Minneapolis and St. Paul office redevelopments
Mixed use buildings
Single family suburban developments

Investor projects are underwritten on the project proforma, the lease-up assumptions and your track record.

Multifamily

Apartment and condo construction

Market rate apartment buildings
Condo buildings
Mixed use with residential above commercial
Apartment renovation and repositioning

Multifamily construction carries its own review. See the section below on what an apartment project needs.

How the commercial construction loan application works

Most people searching for construction financing want to know the sequence before they start. Here is how a commercial construction project moves from first conversation to closing at Security Bank.

The first conversationWe sit down and walk through the plans, the site and the goal. This is not an application. It is the meeting where a lender who knows the market tells you honestly whether the project fits and what it will need.
You provide the project packageCurrent tax returns and financial statements, the construction budget, feasibility and proforma financial plans, and the management or contractor team who will complete the work. The section below lists this in detail.
Non-binding term sheetOnce we have reviewed the package, our bankers decide whether to issue a non-binding term sheet. It outlines structure, term, fees and conditions so you can evaluate the financing before anyone spends money on formal underwriting.
Negotiation and acceptanceYou review the term sheet, we negotiate the points that matter to your project, and you accept. Nothing is committed until this step is complete.
Full underwriting and approvalSecurity moves to full underwriting, ordering appraisals and completing the credit review, then takes the loan through approval.
Closing and the first drawDocumentation, title work and closing. The draw process begins as construction starts.

What the term sheet is, and what it is not

A non-binding term sheet is a written outline of the structure we would propose, issued after a real review of your project. It lets you compare financing and plan your capital stack. It is not a commitment to lend. The commitment comes after full underwriting and formal approval. Security uses its experience and creativity to make sure its term sheets are both reliable and transparent, so you can focus on executing your development plan and your sales activity.

What you will need to apply

The construction loan application process requires information about the partners, the project, and the feasibility of the development. Having this assembled before the first meeting shortens the timeline more than anything else you can do.

What we ask for	Why it matters
Current tax returns and financial statements	Establishes the financial capacity of the borrowing entity and the guarantors behind it.
Construction budget	Line-item hard and soft costs, plus contingency. The budget becomes the schedule that draws are measured against.
Feasibility, project details and proforma	Shows what the completed project is expected to earn or sell for, and whether it services the debt.
Plans, specifications and approvals	Confirms the project is entitled and permitted, and that the appraiser and inspector are reviewing the same building you are.
Contractor and management capability	Who is actually going to finish this. Experience with projects of similar type and size carries real weight.
Rent roll or letters of intent, where applicable	On investor and multifamily projects, pre-leasing evidence supports the lease-up assumptions in the proforma.
Appraisals, ordered by the bank	Both "as is" and "as completed" values. These are ordered through the bank, not supplied by the borrower.

Plans drawn, costs set, approvals in hand? That is the right moment to talk.

Start the Conversation

How construction loan terms are structured

Every deal is different, and many other terms may or may not apply to a specific project. This is the high level outline of what a borrower can expect to see on a Security Bank commercial construction term sheet.

The loan itself

Straight line of credit. Fixed commitment amount, no re-advances. Drawn balances stay drawn.
Interest only during construction, typically for a period of 12 to 18 months depending on the complexity and size of the project.
Potential conversion to a mini-perm loan that requires principal and interest payments once construction is complete.
Secured by the real estate, with guarantees from the principals in most cases.

Costs you should plan for

Origination, title perfection and documentation costs to cover underwriting and documentation of the loan.
Draw fees for processing monthly draw requests, due to both the selected title company and the bank.
Third party inspection fees to monitor construction progress. These depend on the size and complexity of the project.
Appraisals for pre and post construction completion, also referred to as "as is" and "as completed" appraisals.

How construction draws work

The draw process is where a construction loan is won or lost operationally. A lender who processes draws slowly costs you subcontractors, and subcontractors who are not paid on time do not come back for your next project.

You submit the draw requestTypically monthly, against the line items in the approved construction budget, with contractor invoices and lien waivers.
Third party inspectionAn inspector verifies that the work billed for has actually been completed in place. This protects you as much as it protects the bank, because it catches a project drifting ahead of its budget early.
Title company updateTitle is updated and lien waivers are collected so the bank's position stays clear as the building goes up.
Funds releasedThe advance is made, your balance increases, and interest begins accruing on the newly drawn amount only.

Retainage, stored materials and change orders all get handled inside this process. Discuss how you want them treated at term sheet stage rather than at the first draw, because the answers affect your cash flow for the whole build.

Financing apartment and multifamily construction

Apartment and condo projects are a meaningful share of the construction lending we do, and they are reviewed differently from an owner-occupied building.

On a multifamily project, the completed building has to support the debt on its own rental income, because there is no operating business behind it. That shifts the review toward the proforma: your market rent assumptions, your vacancy and collection loss, your operating expense per unit, and how long you have assumed lease-up will take. We will test those assumptions against what we see in the submarket, which is one practical advantage of borrowing from a lender who lends in that submarket.

An apartment construction project report for a bank loan should carry the unit mix, the rent roll or pre-leasing evidence, the operating proforma, the construction budget with contingency, the general contractor's experience with similar buildings, and a realistic absorption schedule. Projects that stall in underwriting usually stall on the absorption assumption, not on the construction budget.

If you own apartments already and the project is a renovation or repositioning rather than ground-up construction, that is also work we do. Start with commercial real estate lending.

Andrew Spilseth of Turnquist Spilseth Real Estate

"The speed of getting questions answered by Security has been great. It has made making decisions on projects extremely easy when it comes to lending."

Andrew Spilseth, Turnquist Spilseth Real Estate

Where we lend in Minnesota

Security Bank finances construction projects across the Twin Cities metro and Greater Minnesota. That includes downtown Minneapolis and St. Paul redevelopment work, suburban industrial and retail development, and projects in the smaller Minnesota communities where we have been the local bank for generations.

The practical difference is not geography for its own sake. It is that the lender reviewing your proforma has seen what comparable space actually leases for in that submarket, and the credit decision is made by people you can reach. Find your nearest banker across our 21 Minnesota locations.

Common questions about commercial construction loans

What is a commercial construction loan?

A commercial construction loan is a short-term line of credit secured by real estate that funds a building project in stages as work is completed, rather than in one advance at closing. It is structured as a straight line of credit with a fixed commitment and no re-advances. You pay interest only on the amount drawn during construction, then the loan is paid off or converts to a mini-perm loan with principal and interest payments once the project is complete.

How long does commercial construction loan approval take in Minnesota?

The timeline depends far more on the completeness of your project package than on the bank. A project that arrives with current financial statements, a line-item construction budget, a feasibility study and proforma, entitled plans and an identified contractor moves to a non-binding term sheet relatively quickly. From there, full underwriting includes bank-ordered appraisals, which are usually the longest single item outside your control. Projects that stall almost always stall waiting on borrower documents or on an appraisal, so assembling the package before the first meeting is the single best way to compress the timeline.

What documents do I need to apply for a commercial construction loan?

Current tax returns and financial statements for the borrowing entity and guarantors, a line-item construction budget including contingency, feasibility and proforma financial plans, plans and specifications with evidence of approvals and permits, and documentation of the management or contractor team that will complete the construction. On investor and multifamily projects, add a rent roll or letters of intent showing pre-leasing. Appraisals are ordered by the bank rather than supplied by you.

How much equity do I need to put into a construction project?

Required equity varies by project type, by the strength of the borrower and guarantors, and by the completed appraised value, so there is no single number that applies to every deal. Lenders generally size a construction loan against both the total project cost and the "as completed" appraised value, and advance against whichever produces the lower loan amount. Owner-occupied projects backed by an operating business often support different structures than speculative investor projects. Your lender will tell you the specific equity requirement for your project at term sheet stage. All loans are subject to credit approval.

How do construction draws work?

You submit a draw request, typically monthly, against the line items in your approved construction budget, supported by contractor invoices and lien waivers. A third party inspector verifies that the work billed has actually been completed in place, title is updated and lien waivers are collected, and then the advance is released. Interest begins accruing on the newly drawn amount only. Retainage, stored materials and change orders are handled inside this same process, and how they are treated should be settled at term sheet stage rather than at the first draw.

What is a mini-perm loan?

A mini-perm loan is the intermediate-term financing that a construction loan converts to once the building is complete and occupied. Where the construction loan is interest-only and short-term, the mini-perm requires principal and interest payments and carries a longer term, giving a newly completed project time to establish an operating history before it goes to permanent financing or is sold. Arranging the conversion at the start rather than at the end of construction is one of the more important structuring decisions in a project.

Does Security Bank finance apartment and multifamily construction?

Yes. Market rate apartment buildings, condo buildings, and mixed use buildings with residential above commercial are all project types we finance, along with apartment renovation and repositioning work. Multifamily projects are underwritten primarily on the completed building's rental income, so the review focuses on unit mix, market rent assumptions, vacancy and collection loss, operating expenses per unit, and the absorption schedule during lease-up.

What is the difference between a commercial construction loan and a home construction loan?

A commercial construction loan finances a building held for business use, lease or sale, and is underwritten on the project's economics and the borrowing entity's financial capacity. A home construction loan finances a house you intend to live in, is underwritten on your personal income and credit, and converts to a residential mortgage. They are different products with different documentation and different regulatory treatment. If you are building a home, start with new home construction and renovation loans.

What fees should I expect on a commercial construction loan?

Plan for origination, title perfection and documentation costs that cover underwriting and documenting the loan; draw fees for processing each monthly draw request, payable to both the selected title company and the bank; third party inspection fees to monitor construction progress, which scale with the size and complexity of the project; and appraisals for both pre and post construction completion. Every deal is different and other terms may apply, so your term sheet is where the specific costs for your project are laid out.

Do you finance construction outside the Twin Cities?

Yes. Security Bank lends across the Twin Cities metro and Greater Minnesota, with 21 locations statewide. Projects in smaller Minnesota communities are a long-standing part of our construction lending, not an exception to it, and in many of those markets we have been the local bank for generations.

What determines the interest rate on a commercial construction loan?

Pricing on a commercial construction loan reflects several things together: the prevailing index the loan is priced against, the term and structure, the loan amount relative to both project cost and completed appraised value, the strength of the borrower and guarantors, the project type and its risk profile, and the depth of the overall banking relationship. Because those inputs differ on every project, pricing is quoted on the non-binding term sheet after a real review of your specific deal rather than published as a general figure. All loans are subject to credit approval.

Keep reading

Business financing at Security Bank, the full range of commercial lending
Commercial real estate lending, for completed and income-producing property
Investment real estate guide, how income property is underwritten
Business loan guide, comparing loan types and structures
Residential vs. commercial loans, the key differences explained
Business equipment financing, for the machinery inside the building

Ready to build?

Bring us the plans, the budget and the site. We will tell you honestly what the project needs and whether we are the right lender for it. That conversation costs nothing and it is how every project we finance starts.

Talk With a Commercial Lender Find Your Nearest Banker

Growing, together.

All loans are subject to credit approval. Terms, fees and conditions described on this page are general and illustrative, vary by project, and are set out for a specific project only in a term sheet issued after review. A non-binding term sheet is not a commitment to lend. Page last reviewed July 2026.