Floor Loan

DEFINITION of 'Floor Loan'

In real estate construction, the minimum loan that a lender agrees to advance in order to enable the builder to commence construction and development of a project. Floor loans apply to buildings that will be occupied by tenants.


For example, a bank may agree to advance 70% of the total project cost, with the balance of 30% to be released upon the project achieving certain milestones. These milestones typically include a successful sale or lease of the majority of the project's units, obtaining an occupancy permit, etc.