When It Comes to Real Estate Investment Projects, Not All Contractors Are the Same
Speed, flexibility, and fast closings are some of the biggest advantages of working with a private money lender. But even the best financing cannot save a project derailed by the wrong contractor. When you are using a private or hard money loan from a private money lender like Cetan Funds to finance a fix-and-flip project, residential construction, or commercial construction project, contractor issues are one of the most common reasons projects fall behind schedule and over budget.
“Many newer investors underestimate contractor-related risks and assume projects will run smoothly,” says Cetan Funds Principal and COO, Zach Smith. “The investors who succeed consistently are the ones who treat contractor selection and team-building as seriously as they treat the numbers.”
Experienced investors often build contractor relationships before they ever need them. Waiting until closing to assemble your team can lead to rushed decisions, weak bids, delays, and unnecessary risk.
Understanding Construction Draws
Hiring the right contractor is not just important for completing the work. It is also critical for keeping your project funded and moving forward smoothly.
Understanding the construction draw process is key. Most private money construction loans release funds in stages through a draw process as work is completed. Draw requests are typically tied to milestones such as demolition, site prep, framing, roofing, or interior finishes. Borrowers usually need enough working capital to cover labor and materials between draws.
“Most private lenders release construction funds as projects progress and verified work is completed,” says Associate and Loan Officer, Landon Matta. “Understanding the draw process ahead of time helps investors avoid cash flow issues and project delays.”
At Cetan Funds, all construction draw requests are managed in-house without third-party inspection delays. Draws can be based on completed work, approved invoices ready for payment, or on-site materials. Most borrowers draw funds twice monthly, though more frequent disbursements can often be accommodated when needed.
Interest is charged only on the funds that have been drawn, not the full loan amount. We also do not charge draw fees or inspection fees. Most draw requests are processed within 24 to 48 hours.
8 Contractor Red Flags Investors Should Watch For
Red Flag #1: Little or No Online Presence
Not every contractor needs a polished website, but reputable contractors usually leave some kind of footprint. Look for business listings, project photos, Google reviews, or references on sites like the Better Business Bureau, Angi, or The Blue Book.
A limited online presence does not automatically disqualify a contractor, but it should prompt additional due diligence.
Red Flag #2: The Bid Seems Too Low
It is smart to compare multiple bids, but the lowest number is not always the best value. Extremely low bids often mean something important has been missed, underestimated, or intentionally excluded.
Ask for detailed pricing that clearly outlines labor, materials, site work, allowances, and contingencies. If the proposal feels vague or incomplete, treat it as a warning sign.
Red Flag #3: They Avoid Providing References
Reliable contractors should be willing to provide references from past clients, especially for projects similar to yours. Speak directly with those references and ask about communication, scheduling, change orders, budget overruns, and overall professionalism.
Red Flag #4: High-Pressure Sales Tactics
Material costs can fluctuate, but good contractors still allow time for review and questions. If someone pressures you to “sign today” or discourages comparison shopping, be cautious.
The right contractor understands that investors need time to evaluate bids, verify numbers, and protect their capital.
Red Flag #5: Limited Knowledge of Permits and Codes
Experienced contractors understand local zoning requirements, permits, inspections, and building codes. If they seem uncertain about the process or expect you to handle everything yourself, that can create major problems later.
The right contractor helps keep your project compliant and moving forward.
Red Flag #6: Refusal to Put Everything in Writing
A written contract protects everyone involved. Agreements should clearly define scope of work, materials, pricing, payment schedules, timelines, warranties, and responsibilities.
If a contractor refuses a written agreement, walk away.
It is also important to maintain records throughout the project, including invoices, lien waivers, emails, change orders, and progress photos. This documentation is often required during the construction draw process and becomes critical if disputes arise.
Red Flag #7: Poor Communication
Construction projects require coordination between borrowers, contractors, lenders, inspectors, suppliers, and local agencies. Communication problems early in the process usually get worse over time.
Pay attention to responsiveness, clarity, organization, and professionalism before signing an agreement.
Red Flag #8: They Are Not Licensed or Insured
This is one of the most important items to verify before work begins. Contractors should be properly licensed, bonded, and insured for the type of work they perform.
Licensing requirements vary by state. In Oregon, contractors performing construction work for compensation generally must be licensed through the Oregon Construction Contractors Board. Investors should verify licensing status and review any history of complaints, suspensions, penalties, or fines before hiring.
Successful real estate investors understand that construction projects depend heavily on the quality of the team executing the work.
The right contractor can help keep projects on schedule, on budget, and moving efficiently through the draw process. The wrong one can quickly create delays, cost overruns, and financing issues.
At Cetan Funds, we provide residential and commercial construction loans throughout Oregon and Southwest Washington backed by experienced underwriting, responsive draw management, and practical real-world lending experience. Our goal is to help borrowers keep projects moving and avoid the common issues that derail investment projects.
If you need help with an upcoming project and want a dedicate financial partner on your team, contact us today.
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BORROWER FAQs
What is a Private or Hard Money Loan?
Private and hard money loans come in many variations, but most are short-term loans provided by an investor or group of investors when conventional financing is unattainable or undesirable.
Most private lenders and hard money lenders, like Cetan Funds, finance projects like fix and flip rehabs, rental properties, commercial bridge loans, land development, and many other unusual or unconventional properties and projects. A private or hard money loan can help real estate investors, developers, builders, and small businesses grow their portfolios and businesses faster than they could on their own.
Here at Cetan Funds, we empower people to build wealth through real estate.
Why choose hard money vs. bank loans?
Hard money (or private) loans are built for speed and flexibility. Banks often require months of paperwork, strict borrower qualifications, and rigid underwriting standards. At Cetan Funds, we base our lending decisions primarily on the value and potential of the property, not just the borrower’s financial profile. This means we can finance properties and projects banks typically decline due to condition, complexity, or unusual circumstances.
Hard money loans are ideal for time-sensitive opportunities like fix-and-flip projects, new construction, or land development.
Where Does the Money You Lend Come From?
Cetan Funds offers two pooled private equity fund investments for Oregon residents who qualify and accredited investors. Our two funds, called Cetan Income Fund and Cetan Opportunity Fund, serve as the primary source of capital for the loans that Cetan Funds originates.
Rather than matching individual investors to individual loans, or borrowing capital from banks or Wall Street as many hard money lenders do, at Cetan Funds, we manage our own pool of funds. The investors own shares of their fund limited liability company and the principals of Cetan Funds manage the portfolio of loans owned by the fund. All loans are serviced by Cetan Funds. To learn more about the advantages of this structure, please contact us.
What Types of Loans Does Cetan Funds Finance?
We can lend on most commercial and residential property in Oregon and SW Washington if the loan is for business or investment purposes. We provide short-term financing for bare land, land development, new construction, rehabs, and residential and commercial bridge loans.
Do You Lend on Primary or Secondary Residences?
No. We can only lend for business or investment purposes and do not lend on owner-occupied residential properties. Check out our blog to learn more about what we do and what we don’t do.
Where Do You Lend?
We lend exclusively in Oregon and SW Washington because we know the market well and are committed to helping grow our local market. We lend primarily in Western, Southern and Central Oregon with an occasional loan in Southwestern Washington.
Do You Only Look at the Property/Collateral?
While we are primarily a “collateral-based lender,” we do not solely look at the property/collateral. In our experience, who you lend to is just as important as what you lend on.
We strive to build long-term relationships with our borrowers, and we cannot achieve that if we focus solely on their real estate. So, we also take into consideration character, capacity, capital, and other conditions.
Weighing these important factors, which are often overlooked by other private and hard money lenders, helps us accurately measure risks for both our borrowers and our investors while allowing us to offer better all-around results for our clients.
Do You Have Minimum or Maximum Loan Sizes?
How Long Are Your Loans?
We offer loans as short as 3 months and as long as 60 months; however, most of our loans are for 6 to 12 months. Plus, we build in automatic extensions to every loan to ensure borrowers have time to deal with unexpected events and circumstances.
What Are Your Application and Underwriting Requirements?
Cetan Funds loans are customized to fit each specific scenario. Therefore, application and underwriting requirements can often vary depending on the situation. Typically, we require the following:
For Applications:
- Cetan Funds Business Loan Application (online form, link provided by your loan officer)
- Personal financial statements for all loan guarantors (form provided)
- Property/project description
- Summary of construction or investment experience (if applicable)
For Underwriting:
- 2 years of tax returns for all loan guarantors
- 3-6 months of bank statements
- Project/property-specific documentation (such as purchase/sale agreements, lease agreements, business financials, etc.)
- Detailed rehab or construction plans and budgets (if applicable)
Please contact us for more information on the application and underwriting requirements for your specific scenario.
How Fast Can I Get a Loan Decision?
How fast is funding?
We pride ourselves on moving quickly. Loan decisions are typically made within 1–2 business days, and pre-approval can often be issued just as fast. Once approved, we can close and fund in as little as 3–5 business days, depending on the project and documentation. That speed lets you secure capital and act on opportunities without the delays common with traditional lenders.
Can I Get Pre-Approved?
How Fast Can You Fund and Close a Loan?
As quickly as 3-5 days.
What is Your Minimum Down Payment?
What Are Your Interest Rates?
Rates vary depending on the project. Typically, annual interest rates are 10-12%. Interest is only charged on the outstanding balance. Therefore, interest is not charged on construction or rehab funds until they are drawn. So, for most of our short-term construction and rehab loans, borrowers actually incur far less than 10-12% in interest expense. For more information, please contact us.
What Are Your Loan Fees?
Origination fees vary depending on the project. Typically, origination fees are 2-4% of the loan amount. We also charge a $995-$1,495 administrative fee at closing.
Can I Live in the Property While I Have This Loan?
Unfortunately, no. Our borrowers cannot live in the residential properties we finance for them.
The only exception is in very specific commercial loan scenarios. If you wish to get a loan on a property you would like to live in now, or in the future, please contact us so we can help you find a lender for that. We are happy to help.
Can I Pay Off My Loan Early?
Do You Fund Rehab and Construction Loans?
On Rehab or Construction Loans, Do You Charge Interest on the Full Loan Commitment?
No. Interest is only charged on the outstanding balance.
How Do Construction Draws Work With Your Loans?
Construction draws are typically disbursed for work completed, materials purchased, or subcontractor invoices ready to be paid. Borrowers work directly with their loan officer, their main point of contact from start to finish on the project, to submit draw requests up to twice per month.
We do not charge fees for construction draws. Draw requests include a breakdown of the items awaiting reimbursement or payment, evidence showing the completed work or materials on site, and copies of subcontractor invoices or receipts over $2,500-5,000. Draws are typically processed in 24-48 hours.
Do You Fund Loans on Bare Land?
Yes, we provide bare land loans. Each situation is different. Please contact us for details.
Do You Finance Mobile or Manufactured Homes?
What is “Cetan”?
Cetan comes from the Lakota language and means “hawk spirit.” We chose it to represent the values we bring to lending: vision to see opportunities, loyalty in building long-term relationships, and speed in delivering funding when it’s needed most.
Supporting local organizations like the Cascades Raptor Center also helps us honor that connection to hawks and our beautiful raptors in the Pacific Northwest while giving back to the community.