Construction Finance Technology Finds Its Footing as Lending Activity Returns

After a period of caution in 2023 and early 2024, banks are returning to construction lending, opening new opportunities for technology platforms that address the sector’s complex documentation and collaboration needs. The renewed activity is prompting both lenders and developers to reconsider how technology can close the gaps where information breaks down, funding stalls, and risk goes undetected.

Will Mitchell, co-founder and CEO of construction finance platform Rabbet, has tracked these changes through both industry data and his company’s client activity. Mitchell’s background spans architecture, structural engineering, and real estate development in Washington, D.C., giving him a ground-level view of how construction projects are managed and where inefficiencies persist.

“I had a weird obsession with the built environment from a young age,” Mitchell says. He notes that, despite the time people spend indoors, the systems that support buildings often receive little attention, despite their impact on energy use and waste.

Mitchell’s move from development into technology came after seeing firsthand the challenges of coordinating multiple vendors and stakeholders. Whether managing a home renovation or a large real estate development, the core problem was the same: information lived everywhere, and no one had a shared, reliable picture of where a project actually stood. This realization led to the founding of Rabbet — a connected financial foundation for lenders and developers that brings budgets, documents, and draw reviews into one system so teams stay aligned and projects move forward predictably.

Banks Resume Construction Lending

Banks’ renewed willingness to finance construction projects marks a significant shift from the past two years, when many lenders retreated amid economic uncertainty. According to Mitchell, the landscape has changed rapidly: “Where two years ago, in 2023, most banks pulled back from construction, and there was a big void that was filled largely by debt funds, starting in 2025, we saw a lot of banks get back into construction, get very competitive with their terms.”

The increase in competition among lenders has benefited borrowers. Where it was once difficult to secure a single term sheet, borrowers now often receive several options for the same deal. This influx of capital has led to compressed spreads and more favorable loan terms, making it easier to finance new projects.

Despite this progress, Mitchell points out that equity remains a sticking point. Many investors are still waiting for existing deals to close or for properties to sell before they can recycle capital into new projects. “The thing that was holding things back and still is a large focus is just equity and getting more equity available,” Mitchell says. Without more liquidity on the equity side, the pace of new construction will remain constrained, regardless of how active lenders become.

Technology Adoption Accelerates

As banks re-enter the market, their interest in construction lending is driving greater adoption of technology platforms tailored to the sector. Mitchell observes that institutions looking to scale their construction loan portfolios are increasingly turning to software to manage risk, standardize processes, and improve reporting.

“If you’re interested in doing construction loans, you’re probably interested in doing construction loan software,” Mitchell says. The alignment of business goals and technology adoption has become more pronounced as banks seek to handle larger deal volumes with fewer staff and tighter compliance requirements.

A major factor behind this shift is the ongoing retirement of experienced construction loan administrators. Mitchell notes that it has become harder to fill these specialized roles, making it critical for banks to use software that can facilitate onboarding and training for new hires. These platforms not only automate repetitive tasks but also embed industry expertise, helping less-experienced staff avoid common pitfalls.

Most Rabbet customers, Mitchell explains, come to the platform after outgrowing manual systems. “Excel works great for a single project, but it doesn’t integrate with your other systems. It has math errors at times. It doesn’t have controls and compliance. It’s hard to collaborate on,” he says. As soon as organizations attempt to track multiple projects or interface with accounting, asset management, and risk departments, spreadsheets quickly become inadequate. Software platforms address these gaps by offering better controls, real-time reporting, and easier collaboration across teams.

Project Performance

Rabbet’s data provides insight into project health and market dynamics. The platform can flag early warning signs when projects deviate from expected timelines or budgets. Mitchell identifies two common indicators of trouble: spending that lags behind schedule and excessive use of contingency funds due to frequent change orders. For example, if a project is expected to be 40% complete but has only spent 20% of its budget, it’s likely falling behind. Conversely, rapid depletion of contingency reserves often signals scope changes or unforeseen issues.

In terms of asset classes, multifamily and office projects continue to face obstacles. Mitchell notes that multifamily developments are struggling in many markets due to oversupply and flat rents, while office properties remain difficult to finance amid uncertainty about long-term demand. In contrast, sectors such as industrial, data centers, retail, and affordable housing are attracting more aggressive investment as their fundamentals remain stronger.

A persistent challenge in today’s market is lenders’ reluctance to accept trended rent projections. Most banks now require underwriting based on current, untrended rents, making it harder for developers to justify new deals on the assumption that rents will rise over the next two years. This conservative approach has tightened deal economics and forced sponsors to revisit assumptions about future cash flow.

Standardization and Industry Efficiency

One of the sector’s ongoing pain points is the lack of standardization in draw package formats – the documentation developers submit to lenders to request funds during construction. Mitchell describes a recurring problem in which lenders specify a preferred format, but developers either aren’t informed or don’t adjust their processes, leading to delays and confusion.

“There’s an opportunity for a standard draw package that everybody agrees on in a relatively standard format that allows both parties to transact more efficiently,” Mitchell says. Rabbet is currently working on tools to help bridge this gap, aiming to reduce friction and speed up fund disbursement. Standardization would benefit both sides by minimizing errors, reducing back-and-forth communication, and enabling better data analysis across portfolios.

AI’s Role and the Path Forward

Looking ahead, Mitchell sees artificial intelligence playing a greater role in construction finance. Still, he views it as a tool for incremental improvement rather than a force likely to upend the industry. Rabbet’s focus remains on using AI to automate routine tasks, extract insights from data, and enhance the user experience. “I don’t believe what we’re building can be disintermediated by AI, but AI can help us deliver on our vision faster,” he says.

Mitchell cautions against expanding platforms too broadly at the expense of quality. “Some folks make the mistake of making really broad software that does a lot of things poorly. We want to do a few things absolutely as well as we can, and I don’t think we’ve done that yet,” he explains. The goal is to refine core offerings and ensure they deliver tangible value to both lenders and developers.

Conditions Favorable for Technology Adoption

The convergence of renewed lending, a shifting workforce, and ongoing efficiency challenges is making construction finance more receptive to technology than at any point in recent memory. Banks competing for deals need better tools to manage risk and scale operations, while developers face pressure to deliver projects on time and within budget despite tighter margins.

Platforms that can centralize documentation, automate compliance, and provide real-time insights are finding a receptive audience among both lenders and borrowers. The industry’s gradual embrace of technology is not just about keeping up with competitors, but about fundamentally improving how projects are managed and risks are assessed.

For Mitchell, the mission remains clear. Drawing on the origin of Rabbet’s name — a woodworking joint designed to connect and strengthen two pieces — he sees the company’s role as connecting industry players and making their work stronger through better collaboration and information sharing.

As construction finance continues to evolve, the winners will be those who use technology not just to digitize existing processes, but to rethink how projects are executed from the ground up. The sector’s growing comfort with digital tools signals a turning point: efficiency and transparency are no longer optional, but expected. Technology is quickly becoming the backbone of modern construction finance, supporting a new era of growth and resilience.

This article was first published on the KeyCrew Journal here, and is republished with permission on The Platform Report.