Guaranteed Maximum Price ContractGMP
Quick answer
A guaranteed maximum price (GMP) contract caps what a general contractor can charge for a project, shifting cost-overrun risk to the contractor.
Construction lenders strongly prefer GMP contracts because they cap hard-cost exposure. Under a GMP the contractor absorbs overruns above the cap, subject to approved change orders and allowances. Lenders will typically also require a payment and performance bond or a completion guarantee from a creditworthy sponsor.
Related product: Construction Financing
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