NeighborWorks America provides predevelopment loan funds to help developers cover early-stage costs associated with affordable housing projects. Loan amounts, typically ranging from $50,000 to $500,000, depending on the project’s size and scope. The loan proceeds can be used for predevelopment activities, such as environmental assessments, architectural and engineering work, site acquisition, legal fees, market studies, and other initial project costs. The cost of the predevelopment financing, i.e., the interest rate, varies depending on the loan amount, the project’s risk profile, and the borrower’s financial condition, but are generally below-market rates. The loans are usually structured with flexible repayment terms, often deferred until permanent financing is secured or construction begins. The loans may require collateral, e.g., a lien on the project or guarantees from the borrower.
Developers can apply for the predevelopment loan through NeighborWorks America’s network of local organizations. The application requires a detailed description of the project, including scope, financial plan, timeline and the impact on the community. Required due diligence and documentation for the application includes development proformas, financial statements, evidence of site control, along with a predevelopment budget. The loan underwriting process during the application process consists of an assessment of the developer’s capacity, the feasibility of the project, and the plan for securing permanent financing. Predevelopment loans are typically offered on a rolling basis. There are no strict deadlines, but availability may depend on funding levels at any given time. It is recommended to apply as early as possible to secure funds. These loans help developers bridge the gap between the early planning stages and securing permanent financing, which is critical for getting affordable housing projects off the ground.
You can find a list of NeighborWorks America’s network of local organizations on their official website. The page provides a searchable directory of local NeighborWorks organizations across the U.S., which you can contact to inquire about predevelopment loan funds and other support services for affordable housing development.
