Experienced developers know that financing large-scale projects means going beyond individual qualifications.
For loans in the $750K–$5M range, lenders increasingly require borrowers to be structured as business entities (typically LLCs or corporations) with proven track records.
So, what are the key construction loan requirements for business entities, and how do they differ from individual borrower expectations?
If you’re planning to fund your next development through an entity, understanding these distinctions can save weeks in underwriting and thousands in potential delays.
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What are business entity construction loans?
Business entity construction loans are commercial-purpose loans extended to legal business entities, such as LLCs, corporations, or partnerships, rather than to individuals. These loans are commonly used for ground-up development, major rehabs, or multi-unit projects.
Unlike consumer or owner-occupied loans, business entity construction loans:
- Are based on the project’s feasibility and the borrower’s experience
- Require the property to be held in the entity’s name
- Involve more complex documentation and compliance
- Are designed for non-owner occupied, investment-focused real estate
At Marquee Funding Group, loans are only available to business entities with at least three completed development projects, ensuring every borrower is experienced and equipped to manage capital-intensive builds.
How do construction loan requirements differ for business entities vs individuals?
The underwriting approach for business entities is fundamentally different from that of individual borrowers. Here’s how:
| Requirement Category | Individuals | Business Entities |
| Borrower Type | Personal income, credit, and DTI | Entity docs, project history, managing member |
| Ownership | Property in personal name | Property held in LLC or Corp name |
| Documentation | W-2s, personal returns | Articles, operating agreement, EIN |
| Credit Analysis | FICO score, personal liabilities | Business credit, managing member FICO |
| Experience | Optional or limited consideration | Required (3+ projects) |
| Title & Insurance | Personal name | Entity name with endorsements |
Lenders want assurance that a business entity is more than a name. They must also operate like a company with records, roles, and results.
What documentation do LLCs and corporations need to provide?
Entity borrowers need to present formation, authorization, and financial documents. At a minimum, construction lenders expect:
- Articles of Organization (LLC) or Incorporation (Corp)
- Operating Agreement or Bylaws
- EIN confirmation from the IRS
- Business bank account statements
- Corporate resolution or consent to borrow
- Certificate of Good Standing
- Entity-held title vesting documents
These documents prove your entity exists, is authorized to borrow, and is structured for real estate activity. Missing or outdated paperwork is one of the most common reasons for underwriting delays.
Why is experience verification essential for entity borrowers?
Many private construction lenders like Marquee require that borrowers have completed at least three successful development projects. Why? Because experience directly correlates with execution risk.
For business entities, that experience must be clearly documented in one of two ways:
- Entity-level experience: Previous projects completed under the LLC or corporation name
- Principal experience: Projects completed by managing members, with proof of involvement and outcomes
Experience summaries typically include:
- Property addresses
- Project type and scope (ground-up, renovation, etc.)
- Completion timeline and exit strategy
- Sale price or retained value
- Photos or documentation of progress and result
Underwriters want to see that your team can execute on scope, budget, and timeline, especially when loan sizes cross the $1M threshold.
How do lenders assess credit and liquidity for business entities?
Even though the loan is to the business entity, the personal credit and financial strength of managing members still matter, especially in private lending.
Lenders evaluate:
- Managing member FICO scores (typically 660+ preferred)
- Business bank account balances for reserves and draws
- Liquidity for interest reserves and soft costs (usually 6 months’ worth)
- Project equity contributions from the entity or principals
- Business credit (if available), especially for seasoned developer LLCs
Liquidity is about showing money in the bank, but lenders also check the entity’s ability to handle overruns, delays, and holding costs.
What title and insurance rules apply to entity-held properties?
All real estate securing a business entity construction loan must be:
- Titled in the legal name of the borrowing entity
- Supported by a FIRREA-compliant appraisal
- Covered by insurance, naming the entity as the insured
- Free of liens or title defects that could disrupt funding
Additionally, lenders often require:
- Title endorsements that confirm the lender’s lien position
- General liability and builder’s risk insurance specific to the entity
- Entity-level indemnity language in title and escrow documents
Attempting to title the property in a member’s personal name is a fast track to denial. Everything must run through the entity to meet compliance.
Do business entity borrowers need personal guarantees?
In many cases, yes, especially for newer entities or complex projects. Most lenders require the managing member(s) to sign a personal or full-recourse guarantee, even when lending to an LLC or corporation.
Why?
- Entities can be dissolved or shielded
- Projects carry a timeline and cost overruns
- Guarantee structures create alignment of risk
However, experienced developers with proven track records may negotiate limited or partial guarantees, especially when:
- The entity has a long operating history
- Significant equity is in the deal
- Previous loans have performed without issue
Discuss guarantee options early with your lender. These terms can impact your entire risk profile.
What mistakes delay approval for business entity construction loans?
Even experienced developers run into snags. Common issues include:
- Outdated operating agreements missing borrowing authority
- Title held in wrong name (e.g., member vs LLC)
- Missing corporate resolutions for loan authorization
- EIN mismatch between entity docs and bank accounts
- Incomplete experience documentation
These issues may seem minor, but they can delay underwriting by days or force restarts if they surface late in the process.
How can you prepare your entity for underwriting success?
To ensure a smooth approval, experienced developers should:
- Organize all entity formation documents in advance
- Create a clear project experience portfolio
- Provide evidence of capital contributions and liquidity
- Get title, insurance, and escrow in entity name
- Confirm managing member authority in writing
- Be ready to provide guarantees if required
Construction lenders like Marquee evaluate your entity as a business capable of completing large, time-sensitive projects. The more organized and professional your submission, the faster and more favorable your funding outcome.
Need help navigating construction loan requirements for your LLC or Corp?
Apply now with Marquee and fund your next project faster.