A knockdown loan is a type of loan provided specifically to finance the demolition and reconstruction of a property. It allows property owners to tear down an existing structure and build a new one in its place. These loans are often part of a larger construction loan, and funds are released in stages as the project progresses. Knockdown loans are popular in urban areas where land is limited, allowing for the modernization of older properties. Borrowers typically need to meet strict lending criteria to secure this type of financing.