Construction and development are high-risk industries that require thoughtful financial strategies to cover all stages of construction. We arm clients with financial strength to cover planned costs, administrative expenses, equipment, and the inevitable unexpected. We help ensure that your project keeps moving from ideation through the ribbon-cutting.
What is a Construction Loan?
Commercial construction projects require a substantial amount money, usually several million dollars. A construction loan is a short-term loan for construction companies and developers to finance the costs of construction or renovation of a commercial real estate project while the project is underway. This allows the borrower to purchase land, construction materials, labor, permits, and other components needed for the construction or renovation of a building. If the company needs equipment for the project, Equipment Financing can help finance the machinery you need.
How do Construction Loans work?
Because these are high-risk loans, Construction Loans work differently than other loans. Lenders do not issue the full amount of the loan upfront. The borrower receives funds based on a draw schedule as the project progresses through new phases of construction. The first draw is usually for land development, and the next draw might be for demolition, the next for drywall, and so on. The borrower only pays interest on the portion of the loan that has been drawn from the loan pool.
CONSTRUCTION LOANS CAN …
>> Keep interest rates lower since borrowers only pay interest on the amount drawn on the loan.
>> Offer loan terms between 5 to 20 years, or even longer in some cases.
>> Construction loans can transition into long-term financing.
>> Cover all of the costs associated with a commercial construction project, including equipment, labor, bidding, and more.
Construction Loans can help you procure and prepare raw land before construction begins, and cover all of the intricate requirements needed for new construction.
Construction Loans can also be used to transition an existing business space into a new use, like turning a shop into a restaurant, or could be used to upgrade or expand an existing business.