If your development company is planning a structural transformation or a significant value-add project, renovation construction loans can provide the capital flexibility you need.
But not all lenders or loan programs are built to support complex improvements. For business entities with a strong track record, finding the right financing partner is just as important as the project plan itself.
This guide will explain how major rehab construction loans work, who they’re for, and why experienced developers operating through LLCs or corporations are best positioned to secure and maximize this type of financing.
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What qualifies as a major renovation or addition project?
Renovation construction loans are designed to fund substantial improvements to an existing structure.
Unlike cosmetic upgrades or light touch-ups, these projects often require permits, engineering reports, and extensive timelines.
Examples of qualifying scopes:
- Full gut renovations with MEP (mechanical, electrical, plumbing) replacement
- Structural expansions (adding floors or square footage)
- Commercial-to-residential conversions
- Seismic retrofits and foundational rebuilds
- Multi-unit layout reconfigurations
- Major system upgrades (e.g., HVAC, roofing, fire suppression)
Addition financing specifically supports vertical or horizontal property expansions, often increasing rentable space, functional layout, or resale value.
This could include building accessory dwelling units (ADUs), adding second stories, or extending property footprints to boost income potential.
Lenders like Marquee Funding Group typically consider projects where the rehab cost is a significant portion of the total budget—typically 30% or more. This ensures the financing supports truly transformational projects, not just minor cosmetic refreshes.
Who renovation construction loans are meant for
Not every developer is eligible for major rehab financing.
Most private lenders serving this space filter for experience, legal structure, and project scale.
Business entity structure is required
At Marquee Funding Group, only borrowers structured as LLCs, Corporations, Partnerships, or Trusts are eligible.
Developers should make sure their business registration is current and all legal paperwork is available, including Articles of Organization and EIN documentation.
A well-structured entity not only meets lender requirements but also streamlines future refinancing or exit strategies.
Experience is non-negotiable
The borrower must have completed at least three prior development projects. This experience is a central part of the underwriting process.
Experience shows the lender you can handle budgeting, permitting, contractor oversight, and market timing.
It also provides a risk buffer—experienced developers are more likely to pivot and solve issues mid-project.
Loan sizes start at $750K
Projects seeking less than $750,000 in financing typically fall outside the scope of major rehab loans. Most approved deals at Marquee range from $750K to $5M, with $1M+ being common in California.
These larger loan amounts reflect the cost of complex urban projects, high-quality materials, and rising labor costs.
Addition financing and full renovations often require capital for both hard and soft costs, including architectural planning, inspections, and temporary relocation or staging.
What sets this financing apart from other loan types?
For experienced developers, renovation construction loans offer a middle ground between ground-up construction financing and short-term bridge capital.
Here’s how they differ:
Disbursement by draw schedule
Funds are not released all at once. Instead, they are disbursed in stages based on construction milestones, typically validated by site inspections. This reduces risk for both lender and borrower and ensures accountability at each phase.
Borrowers should plan ahead for these draw schedules—having enough liquidity or a line of credit to bridge between disbursements can prevent costly delays.
Designed for improvement-based value creation
These loans work best when the value uplift comes from physical improvements, not just market appreciation. The lender underwrites based on ARV (after-repair value) and needs to see clear ROI.
This is particularly important in urban infill or gentrifying areas, where skilled developers can reposition assets for a higher and better use—raising rents, increasing occupancy, or converting use types altogether.
More flexible than banks, more structured than flip loans
Unlike traditional bank financing, renovation construction loans usually don’t require full income documentation. And unlike fix-and-flip loans, they expect sophisticated plans, experienced operators, and business-level documentation.
These loans often close in 10–21 days, compared to the 45–60 days typical of banks. For developers, this speed can mean winning competitive acquisitions or meeting 1031 deadlines.
Key elements underwriter will evaluate
A lender like Marquee will review more than just the numbers.
Underwriting for major rehab projects considers:
1. Entity documentation
- Articles of organization or incorporation
- Operating agreement or bylaws
- EIN verification
- Certificate of good standing (in some cases)
2. Track record & resume
- Evidence of 3+ completed projects
- Relevant permits, photos, or appraisals from past deals
- References from GCs, inspectors, or other lenders
3. Scope of work
- Detailed construction budget
- Timeline of milestones
- Contractor bids and/or agreements
- Proof of permit status or planning review
4. Exit strategy
- Is the borrower planning to sell or refinance?
- What’s the ARV and market absorption rate?
- Contingency planning (e.g., if exit timeline extends)
5. Rehab percentage
- Projects where 30%+ of the total cost is improvement-based are prioritized
- Clear delineation of improvement vs. acquisition costs
Lenders also want to see professionalism in how this information is presented. A well-organized loan package can speed up approval significantly.
Where renovation construction loans work best
Marquee focuses primarily on California and a few other strategic U.S. markets.
These loans are ideal for:
- Los Angeles & Bay Area urban infill
- Ventura & Orange County property upgrades
- Distressed asset repositioning in core metro areas
- Luxury home expansions in high-demand neighborhoods
Zoning, permit feasibility, and neighborhood demand all play a role in project eligibility.
Developers should understand local building codes, ADU policies, and entitlement processes, especially when seeking addition financing that expands property density.
Benefits for experienced developers
Business entities with the right qualifications often prefer renovation construction loans over bank financing due to:
- Faster close times
- Stated income options for entity borrowers
- Custom draw schedules for high-touch project phases
- Loan structuring based on ARV, not just purchase price
- Minimal red tape compared to institutional financing
Additionally, experienced borrowers often qualify for better rates and terms due to their demonstrated ability to manage their finances effectively.
Marquee’s experience-first underwriting means the more you’ve done, the better your loan outcome.
Is this the right loan for your next project?
If your entity has a solid track record and you’re planning a substantial improvement—whether through structural addition, layout transformation, or adaptive reuse—a renovation construction loan may be the best tool for scaling your portfolio.
The more complex your project, the more important it is to have a lender who understands development cycles, local markets, and the financial contours of high-value renovation.
Marquee Funding Group specializes in financing experienced developers. Get started with addition financing now.