Tips For Obtaining Commercial Construction Loans For A Small Business
If you have a small business that requires a specially built building, such as an automotive repair or machine shop, then you will likely need to obtain a commercial construction loan to finance its building. While building your own space comes with a hefty bill, it is the best way to ensure your business is housed in the right structure to meet its needs.
If the process of applying for commercial construction loans makes your head hurt, then you will be pleased to learn that the process really isn't very difficult. In fact, by following each of these tips, you can get approved for the loan you need so you can start building:
Tip: Understand that Construction Loans have a Limited Timeframe for Repayment
When you obtain a mortgage loan on a home or commercial property, it has a payback schedule that lasts for at least a few decades. However, construction loans are designed to work as your funding source only until the building is completed. Once your new building has been built, then you are expected to pay off your construction loan with either a commercial mortgage loan or cash reserves. For this reason, you will have an easier time obtaining a construction loan if you can prove to the lender that you will be able to secure a mortgage or pay off the loan once the building is erected.
Tip: Work with an Experienced Building Contractor
Since your construction loan will be funding the work completed by your building contractor's company and their subcontractors, it is vital that you work with someone who has a lot of this type of experience in your local area. Your builder must have an excellent reputation without any violations against their contractor's license, or your finance company or bank may not approve your loan.
Tip: Get a Building Budget and Estimates Down on Paper
When you apply for your commercial construction loan, you will be asked to submit a copy of any cost estimates or budgets you have for the project. Your application process will go a lot smoother if you get all of these things together before applying. Take the time to sit down with your builder and come up with the most accurate and detailed budget possible.
Finally, your lender will also want to see your business's financial documents. So, you may need to get copies of your pertinent documents from your accountant.