Understanding Commercial Construction Loans
Developing a new building intended for commercial purposes can be a long process. This is particularly true if the building is intended for more than one business that will all be sharing the same building. You need to be certain that enough financing is in place to get the project off the ground and will continue to be there throughout the construction process. It is important to understand every aspect of the financing process because you will be working with the lender for a while, so review all aspects of commercial construction loans.
Initially, you need to find lenders in your area willing to give out loans for construction projects. In the past, most project managers’ would be limited to going to a bank or credit union. These days, many different types of alternative lenders are available. Occasionally, it can be advantageous to go through a less traditional route. However, you need to review all your options thoroughly and review the terms of agreement. This will allow you to make an informed decision and can pick the best loan for the job.
There are several loans you will likely need to acquire. First, you will need to get short-term financing. These construction loans are obtained before the project starts. It allows you to set everything up, so you are ready to get started in no time. Next, you need to secure long-term financing. These are loans you take out when the project is already underway. To get these loans, lenders want to see that the project is stable and is progressing smoothly. You can get both types of financing at the same time under one umbrella in the form of a mini-perm loan.
For any kind of loan, you will need to submit an application. The lender then reviews this and determines whether it is a wise investment on their end to provide you with the funds you are requesting. To reach a conclusion, the lender will look at the risks associated with the project, the overall market conditions for construction jobs and the development team working on this job. In the event the construction loan is approved, you will then be given the binding agreement to look over and sign.
It can be difficult to secure the funds you need. That is true of almost any loan. However, it is fully possible to get commercial construction loans with minimal hassle as long as you fill out the application fully and understand the terms of what you are agreeing to.