BANK LENDING

Bank Lending to Construction Project

Bank Lending to Construction Project

Introduction

The main purpose of this research proposal is to make analysis that how banks can afford to lend money to finance construction projects with the economic climate. The paper discusses the different ways through which the banks can lend money to finance the construction projects.

Description of the research problem

The problem identified in this research paper is that how banks can afford to lend money to finance construction projects within the economic climate.

Justification of topic choice/explanation of why the research is important

This research is very important in order to understand the different ways through which the banks can lend money to finance the construction projects. The research topic is important for students in such a way that it helps the students in getting the proper knowledge about the different ways through which the bank can lend money to finance the construction projects (Ahn, 2009, p. 165). This research paper also helps students in getting information that what is the effect of the economic climate in bank lending.

Aim(s) and objectives

The main aim of this paper is to understand the ways through which the bank can afford to lend money to finance construction projects within the economic climate.

The objective of this paper is to understand different perspectives of bank lending for the construction projects.

Literature Review

In such economic conditions, it is very difficult for banks to lend money for the construction projects. In such economy of recession, it is very difficult for the banks to lend money to banks. The main reason behind such difficulty is that the environment is uncertain (Humphrey, 2007, p. 73). Banks use different problems in lending money because there is a great danger that the borrower will not repay the money. Therefore, banks need complete security from the borrowers. The securities can be of different types: it could be either the property of the same amount or any other asset of the same cost. Normally, companies lend money for the purpose of commercial use. The loans for the construction projects can be either for personal or commercial purpose. Construction loans for commercial projects provide capital for commercial construction. This can be, for example, a new retail, industrial, or apartment building (Harper, 2006, p. 49). Any construction meant for business, or as a lucrative venture would be considered commercial use. Commercial construction loans are just one of the vehicles that may be available for a company. Other options include selling shares when the stock or taking debt by issuing bonds (Hall, 2007, p. 90).

The process of obtaining a commercial construction loan is usually much more complicated than that required for a private loan real estate. There are a number of benchmarks that often require the issuance of commercial construction loans. Not all banks require the same tests, but some are very common. While credit rating of an individual is still very important, these tests are often the difference between approval and denial. They can help determine interest ...