Built Technologies’ Construction Loan Management System: The New Industry Standard

The financial ecosystem surrounding any construction project is infinitely complex, and benefits from real-time collaboration between stakeholders in a tightly structured system of management to keep the entire process in check. Partner Insights spoke to Jim Fraser, director of commercial real estate strategies at Built Technologies, about how Built has created a construction loan management solution serving lenders, developers and general contractors, and how today’s economic realities will affect CRE construction moving forward.   

Commercial Observer: Give us a brief overview of Built Technologies.

Jim Fraser: Built was started to solve for the pain that developers and builders experience in trying to draw funds from their construction lenders. Lenders want to control funds to make sure advances are aligned between the construction loan and the overall project progress. In 2015, Built’s founders were struggling to get timely construction advances from their lenders. It was a paper chase — emails, phone calls, text messages, PDFs — just to get the required draw information to lenders, and each lender was requesting different formats for essentially the same information. Our founders realized there had to be a better way. Since lenders were all asking for the same documentation, we thought we should be able to generate a digital solution for standard draw documentation and diligence activities.

That’s the idea that started Built Technologies seven years ago. Since then, the company has grown to over 300 employees, mostly based here in Nashville. In fiscal year 2021, we reached a milestone — $200 billion in construction projects managed on Built’s platform, which serves banks, non-banks, debt funds and private lenders, credit unions, mortgage companies, life companies — essentially, all lenders in the debt space that finance real estate construction. Today, Built’s platform serves everything from owner-occupied consumer residential properties doing a kitchen remodel under GSE [government-sponsored enterprise] programs at one end of the spectrum, all the way up to the largest-balance CRE construction managed on Built, which is just over $1 billion with a complex capital stack and multiple funding sources.

Who are Built Technologies’ primary clients?

Built’s primary clients and systems serve the lender — that’s who engages us. But, given the multiparty nature and collaborative requirements in real estate construction, Built also supports the owner/developer, general contractor and diligence providers like inspectors and title companies. After serving the lending industry, we also realized that we could provide tangible benefits to those on the receiving end of draw disbursements, and develop a suite of products specifically for other participants in the construction industry as well. 

How many lenders does Built Technologies work with?

Across the U.S. and Canada, there are 170 current active lenders and over 200,000 contractors using Built’s systems. For reference — and based on call report filings from regulated financial institutions — we can gauge our share of construction lending activity. We have 38 of the top 100 U.S.-regulated construction lenders managing construction on Built.

What other unique services does Built Technologies offer construction professionals?

It goes back to the pain points I mentioned earlier. As an owner or developer communicating to my lender, I’m required to produce certain documents and reports. These additional requirements, like progress inspections or lien waivers, are features that Built technology has automated. For example, using Built’s mobile technology, an inspector who is reporting on the project can use our technology to go to the site, take photos and return their findings in real time to the loan administration team. By digitizing this flow of information between stakeholders, our customers get a material pickup in the speed of draw funding and an improvement in interest income.

How does Built help lenders increase their interest income?

Lenders using manual, offline processes can take eight to 10 days to receive and process a construction draw request. While in-process funds are not outstanding, the lender isn’t earning interest on that advance. If the lender can shorten that turn time from 10 days down to three or even two days, then they’ve picked up seven or eight days of additional interest income. For lenders with larger CRE construction balances, those additional days of interest accrue quickly. For smaller lenders, simply improving internal controls while providing an online construction loan solution for their borrowers brings value. 

How expansive is Built’s business?

The U.S. Census Bureau estimates U.S. construction, excluding public improvement investments, at $700 billion. Built is actually touching a large share of the total construction activity in the U.S., both residential and commercial — we finished 2021 at just over $200 billion. And, we also added Canada in 2020, with several of the largest Canadian lenders now active on Built.

Are there any new products or services Built is looking forward to introducing this year?

We’re expanding the way we think about existing offerings to better meet the needs of our customers. Last year, Built released a feature that monitors properties for any involuntary liens attaching to the real estate securing the construction loan. We introduced this service to current Built customers and found that lenders were frequently unaware of liens that had been recorded between title searches or endorsements. Resolving larger, and potentially significant non-monetary defaults quickly is important, not just for the lender, but for the important curative value they hold for the lender’s client to resolve disputes before they harden into litigation. Now, broader CRE portfolios with term debt are seeing the value of these data connections to help surface hidden loan defects quickly. 

As material costs decrease while inflation increases, how will the construction industry be impacted?

Not all material costs are moving in tandem with supply chain issues. We see a range of disruptions affecting construction progress across different asset types and local markets. Most construction loans have interest reserves capitalized in the loan budget. As interest rates rise and note rates adjust, interest reserve balances will be stressed by both increased material costs and expanding construction durations. The combination of these will increase the interest burn on the reserve balances. The builder/developer may have to supplement the reserve balance midstream as a result.

Now that we are hopefully approaching the later stages or maybe even the end of the pandemic, what will this mean for regulations around commercial real estate construction?

At least for regulated financial institutions, the CARES Act allowed banks to extend and modify construction loans that were being impacted by pandemic-related health and safety controls, and to be very tolerant in how banks risk-rated and managed construction loans during the pandemic. I don’t see a full repeal of the CARES Act, but I do see some modifications as credit officers tighten back to more normal market conditions, which means more scrutiny on how lenders are evaluating and managing their construction portfolios