What a mini-perm loan is

A construction loan is built for the draw period. It is a poor instrument for the two or three years after the certificate of occupancy, while leases start and the operating history a permanent lender wants does not exist yet. A mini-perm fills that gap. Investopedia's definition, which matches the way bankers use the phrase, calls it a short-term loan that usually lasts three to five years, used to pay off a construction project or to carry income property that is not ready for long-term debt. 'Perm' refers to the permanent loan the borrower does not have yet. The mini-perm ends in a balloon. Someone has to refinance it, sell the property, or pay it off.

Often the bank that funded construction also offers the mini-perm, so there is one relationship from the last draw into lease-up. That is common. It is not required. Another lender can take out the construction loan if the first bank will not hold the lease-up. Capital Market Funds arranges those introductions. We are not a bank, we do not fund draws, and we do not keep a construction-administration desk. The Arizona comparison of who holds a construction facility is Arizona construction financing.

Mini-perm, bridge, and a single-close HUD loan

Bridge, on this site, is a short loan on a property that already exists and is in transition: a renovation, a lease-up of an older building, or a closing date a permanent lender cannot meet. The Arizona page is bridge financing. A mini-perm is the cousin that specifically follows new construction. Using the words interchangeably hides which lender has to be in the room. If the building is standing and you are renovating it, start with bridge. If you are leaving a construction loan, start with mini-perm.

HUD 221(d)(4) is a different machine. It is Federal Housing Administration insurance on a multifamily construction loan that converts to a long insured permanent loan, made by a HUD-approved lender. It is not a bank mini-perm, and it is not something this firm originates on its own paper. We do not claim MAP or LEAN approval. If the plan is truly 221(d)(4), say so. If the plan is a bank that will hold three to five years and then look at the rent roll, say that instead. A long permanent loan, once the property is leased, is Arizona permanent financing.

Live construction pages on this site mention a mini-perm as the way out of a bank draw facility. They do not define it. This note is the definition. The draw paperwork, which is a statute about notices and lien waivers, stays on the Arizona construction checklist.

What to settle before you call it a plan

Ask whether the mini-perm is a conversion of the construction loan or a brand-new closing. Ask whether it amortizes at all, or is interest-only until the balloon. Ask what occupancy or coverage lets you refinance early, and what happens if lease-up is late. Extensions, if they exist, should be written. A verbal 'we can add a year' is not an extension. The balloon mechanics, when that date arrives, are the same idea as any other commercial balloon, written up for Arizona owners on the balloon note.

We will not quote a mini-perm rate, a loan-to-cost, or a standard term. Investopedia's three-to-five-year description is a definition, not a quote. The lender's term sheet controls. Bank construction comparisons that already sit on this site, including Arizona bank construction, are about who funds draws. This page is about the loan that follows. Craig Hoebing arranges both conversations from Scottsdale, CMB-1047342, NMLS 1445066.