Commercial Construction Loans

commercial construction financing

Commercial construction loans are loans that are given to businesses and individuals for the purposes of constructing new developments. The new developments may include apartments that may be sold or rented to others. In addition, the new developments may include new buildings that will house the borrowing company.

Commercial banks are the most common institutions that offer the construction loans; however, if you are disqualified by the commercial banks, you can always seek the services of the hard loan lenders. Although, the hard loan lenders usually make it easy for you to access the loan, they usually have higher interest rates.

Qualifications for the Commercial Construction Loans

  • To qualify for the commercial construction loans, the value of the property that you constructing should be higher than the loan that you are asking for. Most lenders will require that they offer a loan that is 80% of the value of the property.
  • Most lenders will give you the loan only if you are able to pay the down payment. Most of the construction loans will require you to pay 30% of the cost of the project.
  • The property that you want to construct should be in a strategic place where it has the potential of drawing in large profits. For example, if the property is a business property, it must be located in a busy and easily accessible area. For example, the property should be at the center of an urban area, or in a semi urban area that is glowing fast.
  • For you to be offered the loan, you should proof that you are able to repay it. Most lenders will require that your income from your property be 25% larger than your monthly loan repayments.
  • Finally, the lenders will offer you the loan only if your net worth is larger than the loan that you are asking for. This is to ensure that even if the property is destroyed, the lender can take some of your wealth to recover their money.

Features of Commercial Construction Loans

  • As mentioned above, you need to make a down payment which is usually 30% of the cost of the project.
  • Another feature is that the loans have a fixed interest rate.
  • Most of the commercial construction loans will require you to start repaying the loan only after the construction of the property is completed and income has started streaming in.
  • The loan allows you to use your property as collateral. When you use your property as collateral, most lenders will give you a loan that is a maximum of 80% of the value of the property.
  • Most of the construction loans have a long service time (usually 15-30 years).
  • These loans have fixed amounts of monthly loan repayments.

Commercial Construction Financing 

Commercial construction loans are a must have for anyone keen on glowing their business. This is because the loans give you an opportunity to construct your desired property even when you don’t have money.  If you planning on getting the construction loan, you should ensure that you seek an experienced and well known loan lender. This is because it’s easier to work with experienced loan lenders.