Recommended
More Related Content
Similar to Avoiding Dental Construction Disasters
Similar to Avoiding Dental Construction Disasters (20)
Recently uploaded
Recently uploaded (20)
Avoiding Dental Construction Disasters
- 2. LIVEOAKBANK 1 2 3 4 5 Top 5 Construction Pitfalls 2 EXTENSIVE DELAYS Due to inexperienced General Contractor (GC), and lack of experience in commercial construction for the healthcare industry UNNECESSARY COST INCREASES Due to multiple change orders throughout construction because the GC incorrectly budgeted on the front end GENERAL CONTRACTOR FINANCIAL INSTABILITY GC cannot afford to pay their employees between monthly billing cycles causing delays due to employees leaving the project and liens being filed INSUFFICIENT PRE-PLANNING Architect overdesigns space resulting in increased architect fees to re-design and delayed construction timeline NOT KNOWING WHAT YOU CAN AFFORD You start design before being qualified for a loan and discussing budget with a bank
- 3. LIVEOAKBANK Step #1 Proper Planning ⮚ Talk to a bank and know your budget ⮚ Asses needs versus wants ⮚ Have an architect involved in advance ⮚ Have an idea of your project • Location • Type: ground-up, leasehold, CRE improvements • Total square footage Step #3 Find bank that works with GC ⮚ We prefer to work with already approved contractors because: • They know the documentation required from planning to doors open • We can speak to the successful projects they’ve completed and determine whether they are the right fit for your project • Our ongoing relationship with your contractor will alleviate stress in the unknown Step #2 Qualifying the General Contractor The Construction Loan Team Process In 3 Steps 3 ⮚ Choose a bank that will work directly with the Qualified GC and Architect every step of the way so that your focus remains on your practice and your project remains on track! Avoid the banks who just send one lump sum out the door and ask you to control it or send the work to a third party.
- 4. LIVEOAKBANK 4 Qualifying Your General Contractor
- 5. LIVEOAKBANK 5 Why You Qualify General Contractors PROJECTS GONE WRONG • Borrower wants to use “buddy” who does construction • Choosing a contractor because you think you’re getting a “deal” • Using a residential contractor for a commercial project • GC’s that don’t have the capacity and resources for a larger project • GC’s not experienced in healthcare industry
- 6. LIVEOAKBANK 1 This particular dentist chose an unapproved contractor with lowest bid and requested that their loan amount decrease to match. 2 Dentist Chose “Cheapest” Contractor Live Oak Bank pointed out red flags and suggested against it Construction Nightmare 6 Based on our extensive experience, Live Oak recommended against it and pointed out issues in the bid that would result in change orders and budget increases but the dentist moved forward with contractor anyway, hoping to get a deal. A True Disaster Story
- 7. LIVEOAKBANK 3 4 Change Orders Ensue Corners Cut 5Liens Filed and GC Abandons Project 7 After construction started the contractor provided the change orders Live Oak had warned about that totaled the original loan amount calculated by Live Oak based on our experience and knowledge of construction costs in their area. Corners were cut and funds were shuffled from the equipment and working capital budget to pay for these change orders. The dentist had to choose used equipment and furniture, leave the walls bare and hire less staff than they had initially planned. The general contractor was left with more paperwork and payments than they could keep track of and subs started walking off the project with some filing liens against the property, and the contractor ended up walking off the site completely.
- 8. LIVEOAKBANK 6 7Project at a Standstill Loan Funds Frozen 8 Because of the liens on the property the loan funds had to be frozen until the (multiple) liens were lifted and the dentists spare time was spent working on resolving these issues that could have been avoided. Progress halted, paperwork piled up, a new contractor had to come in and new subs, it caused headaches for everyone involved and the dentists move in date had to be pushed out.
- 9. LIVEOAKBANK 1 Quality vs Quantity: Lower bids can mean higher cost 2Beauty on the outside/cheap on the inside 3 Subs walk off = liens walk on 4Project at a standstill = income at a standstill Dental Construction Nightmare Key Takeaways 9
- 10. LIVEOAKBANK 10 Why You Qualify General Contractors PROJECTS GONE RIGHT • Borrower builds an experienced dental specific team that can guide them through the process • Relying on expertise of team
- 11. LIVEOAKBANK Working with your General Contractor •Zoning Approval/Verification Use of Building from the City Before you close on your desired property, ensure that the city approves that space to act as a dental or medical facility per their zoning requirements and specifications. Would hate for you to close on land that cannot be of use to your profession. •Fixed Price Contract between Contractor and Owner Have the bank review and edit the contract with your GC for your benefit to ensure you and your loan are protected •Construction Budget/Cost Breakdown Have the bank review with you and can make suggestions to keep budget within target of the loan funds available to you •Construction Schedule/Timeline Gauge in advance the GC’s proposed timeframe for completion to plan for business opening and use of additional loan funds towards equipment purchases, marketing the business and scheduling patients •Monthly Payments to GC Ensure the bank orders inspections, collect lien waivers, request title updates, borrower approval to release your loan funds to the GC 11
- 12. 12 ©2017 Live Oak Banking Company. All rights reserved. Member FDIC.