Managing private construction loans with specialized software means using a platform designed for the complexities of private lending—variable rates, non-standard terms, shorter timelines, and higher risk profiles. Unlike general lending platforms, specialized solutions handle unique documentation, compliance, and communication needs. Sekady supports flexible terms, custom documentation, complex funding structures, rapid timelines, and complete audit trails.
Private Construction Lending: Mastering Complexity with Specialized Software
Private construction lending operates under fundamentally different rules than bank lending. Faster timelines. Custom terms. Complex funding structures. Higher risk. More documentation.
General lending software wasn't designed for this. You need specialized solutions.
What Makes Private Construction Lending Different
Bank lending: Standardized processes, standard loan documents, defined underwriting criteria, predictable timelines (30-45 days to close)
Private lending: Custom terms negotiated per deal, specialized loan documents, flexible underwriting, rapid closings (days to a week), often mezzanine or preferred equity structures, investor capital involved, exit strategies tied to specific events
Complexity multiplier: Each private deal is almost unique. What works for one deal doesn't necessarily work for another.
Why General Lending Software Fails for Private Lending
Problem 1: Inflexible Terms Bank software is built for fixed rates, standard amortization, standard draw schedules. Private loans have variable rates, interest-only periods, flexible draw schedules tied to specific project events.
Problem 2: Limited Loan Structure Support Bank software assumes traditional first lien position. Private lending includes mezzanine loans, preferred equity, bridge financing, multiple tranches of capital.
Problem 3: Poor Documentation Handling Bank software uses standard forms. Private lending requires custom documents for each deal: personal guarantees, preferred equity agreements, non-recourse provisions, specific performance covenants.
Problem 4: Inadequate Compliance Tracking Bank software tracks basic covenants. Private lending requires detailed tracking of complex covenants: budget adherence, specific performance metrics, exit strategy confirmation, investor reporting.
Problem 5: Manual Communication Bank software isn't designed for the constant communication needed between lenders, borrowers, investors, and partners in private deals.
Specialized private lending software solves these problems.
8 Key Features of Private Lending Software
Feature 1: Variable Interest Rate Support
Private loans often have rates tied to SOFR, prime, or other indices. Rates can vary during the loan term.
What you need:
- System calculates interest based on variable rates
- Tracks index updates automatically
- Recalculates payments when rates change
- Reports interest accrual accurately
Why it matters: A $5 million loan with rate tied to SOFR might have quarterly rate adjustments. Manual tracking is error-prone and time-consuming.
Feature 2: Flexible Draw Schedule Configuration
Private loans have draws tied to specific events, not just standard construction phases.
Examples:
- Draws tied to specific approval from city officials
- Draws triggered by specific investor milestones
- Bridge loans with lump-sum drawdown at specified date
- Mezzanine loans with draws based on senior loan performance
What you need:
- Ability to define custom draw triggers
- Multiple draw schedule scenarios
- Conditional logic for draw approval
- Manual draw authorization when needed
Feature 3: Custom Loan Documentation
Each private deal requires unique loan documents reflecting deal-specific terms.
What you need:
- Customizable loan document templates
- Version control (track document changes)
- E-signature integration
- Automatic document generation based on loan parameters
- Storage of all executed documents in the system
Feature 4: Complex Funding Structure Management
Private deals often involve multiple funding sources with different terms, performance criteria, and reporting requirements.
Examples:
- $3M senior construction loan + $2M mezzanine debt + $1M preferred equity
- Each tranche draws at different times
- Each tranche has different interest rates
- Each tranche has different reporting requirements
What you need:
- Ability to track multiple tranches separately
- Separate draw schedules for each tranche
- Performance tracking by tranche
- Separate financial statements by funding source
Feature 5: Rapid Underwriting and Approval
Private loans close fast—sometimes in days. Your system needs to support this pace without sacrificing accuracy.
What you need:
- Streamlined underwriting workflow
- Parallel processing (multiple underwriters on same deal)
- Quick document generation
- Fast approval routing
- Integration with background check, appraisal services
Feature 6: Investor Reporting and Communication
Private deals often have outside investors. They need regular reporting and communication.
What you need:
- Customizable investor reporting dashboards
- Automated report generation
- Investor portal for viewing loan performance
- Distribution history tracking
- Performance metrics by investor requirement
Feature 7: Covenant Compliance Tracking
Private loans have specialized covenants. You need to monitor them continuously and alert when breached.
Examples of private lending covenants:
- Budget adherence (draw amounts must stay within approved budget)
- Loan-to-value (LTV must stay above X% as project appreciates)
- Debt service coverage (DSCR on stabilized property)
- Specific performance (project must reach specific milestones by specific dates)
- Title requirements (no new liens can be placed)
- Insurance requirements (must maintain specific coverage)
What you need:
- Automated covenant monitoring
- Real-time alerts when covenants are breached
- Variance tracking
- Remediation workflows
Feature 8: Comprehensive Audit Trail and Compliance Documentation
Private lending is heavily scrutinized. You need bulletproof documentation of every decision.
What you need:
- Complete audit trail (who did what, when, why)
- Timestamped decisions and approvals
- Supporting documentation attached to decisions
- Compliance checklist tracking
- Regulatory-ready documentation
How Sekady Handles Private Lending
Sekady is built specifically for private construction lenders. Here's how:
Variable Rate Management
- Supports SOFR, prime, and other indexed rates
- Automatic rate updates
- Interest recalculation when rates change
- Accurate interest accrual reporting
Flexible Draw Structures
- Custom draw schedules per deal
- Conditional triggers and approvals
- Multiple draw scenarios
- Manual authorization capability
Custom Documentation
- Editable loan document templates
- Custom clause insertion
- E-signature integration
- Document version control and storage
Complex Funding
- Multiple tranches tracked separately
- Separate draw schedules per tranche
- Performance tracking by funding source
- Investor-specific financial statements
Fast Underwriting
- Streamlined approval workflows
- Parallel processing capability
- Automated document generation
- Quick approval routing
Investor Reporting
- Customizable dashboards
- Automated report generation
- Investor portal access
- Distribution tracking
Covenant Compliance
- Automated monitoring
- Real-time breach alerts
- Variance reporting
- Remediation workflows
Audit Trail
- Complete decision documentation
- Timestamped actions
- Compliance checklist tracking
- Regulatory-ready records
Private Lending Workflow: From Deal to Closing to Management
Pre-Closing Phase (Days 1-5)
- Deal terms are negotiated
- Loan documents customized for this specific deal
- Underwriting completed in parallel
- Background checks, appraisals ordered
- Loan approved and documented
- Result: Loan closes in days instead of weeks
During Construction
- Draw requests submitted by borrower
- Inspections verify work progress
- Covenant compliance automatically monitored
- Investor reports automatically generated
- Interest calculated based on current rates
- Result: Continuous visibility; automatic reporting
Problem Resolution
- If covenant breach detected, system alerts
- Lender works with borrower to remediate
- System tracks remediation status
- Updated metrics reflected in system
- Result: Issues caught early; resolved quickly
Exit Strategy Execution
- Exit trigger (property stabilization, sale, refinance) occurs
- System generates exit documentation
- Payoff prepared automatically
- Distribution to investors calculated
- Final accounting generated
- Result: Smooth transition; all documentation in order
Key Metrics for Private Lending Software
| Metric | Why It Matters |
|---|---|
| Days to close | Private deals must close fast; system should enable rapid closing |
| Covenant breach detection time | Early detection enables remediation; prevents defaults |
| Investor reporting accuracy | Investors rely on accurate reporting; builds trust |
| Audit trail completeness | Regulators may audit; complete documentation is critical |
| Draw processing time | Borrowers appreciate fast draws; accelerates project |
| Error rate | Custom terms mean high stakes; errors are costly |
Best Practices for Private Lending Software Selection
- Verify variable rate support - Ask for examples of variable rate loans the system handles
- Test custom documentation - Can you create the specific loan documents you need?
- Confirm investor reporting - Does the system generate the reports your investors require?
- Check compliance automation - Can it track your specific covenants?
- Evaluate speed - Can underwriting and closing happen in your target timeline?
- Confirm audit trail - Is documentation complete enough for regulatory review?
Conclusion: Specialized Software is Essential for Private Lending
Private construction lending is complex and requires specialized software. General lending platforms can't accommodate the flexibility, speed, and documentation requirements.
Sekady is built specifically for private lenders. It handles variable rates, custom terms, complex funding structures, rapid timelines, and complete compliance documentation.
Ready to optimize your private lending business? Learn more about how Sekady handles private construction loans by visiting our FAQ page or scheduling a demo.
