Glossary Term

What is a Contingency Reserve?

A contingency reserve is a portion of a project’s budget set aside to cover unexpected costs or overruns that may arise during construction or renovation. This reserve acts as a financial safety net, ensuring the project can proceed smoothly even when unforeseen expenses occur. Contingency reserves are a standard practice in construction lending and project management.

How Contingency Reserves Work

Contingency reserves are typically calculated as a percentage of the total project cost, often ranging from 5% to 15%, depending on the project's complexity and scope. Key features include:

Why Contingency Reserves Are Important

Contingency reserves provide critical support for managing risks and ensuring project success:

Examples of Contingency Uses

Common scenarios where contingency reserves may be used include:

Challenges of Contingency Reserves

While contingency reserves are beneficial, they require careful management:

Contingency Reserves with LYNK Capital

At LYNK Capital, we help borrowers structure their financing to include appropriate contingency reserves, ensuring your project remains financially secure. Our experienced team provides guidance on reserve management to mitigate risks and support project success. Contact us today to learn more about our construction lending solutions.