Commercial Construction Loan Basics

The events of last year have likely affected the space your business needs. You may be downsizing, expanding, or changing locations as a result of the changes in the economy in 2020. Whatever the reason for your commercial construction project, take a moment to understand how commercial construction loans work and what they fund.   

What Is a Commercial Construction Loan?

Commercial construction loans are short-term loans that fund ground-up new construction, renovations, tenant build-outs, or land development projects. Your commercial construction project may require several thousand dollars or several million in funding. The wide range of loan amounts and different elements of risk involved in financing a construction project makes construction loans risky for some lenders. Other lenders thrive on financing these types of projects.

Would a 504 Loan from the SBA Cover My Commercial Construction Project?

Very likely, yes. The Small Business Association offers 504 loans to fund property improvements and investment in new machinery or equipment. A 504 loan is a long-term, fixed-rate loan that provides up to $5 million to approved businesses.

If approved for a 504 loan, you can use the money to build ground-up new construction, renovate existing buildings, develop land, and modernize parking lots, utilities, and landscaping. To be eligible for a 504 loan, you must operate in the United States, have a tangible net worth of less than $15 million, and less than $5 million in average net income in the past two years.

What about Loans for Construction-Ready Land?

If you own a parcel of land that you would like to develop for commercial use, a land development loan may be a good option for you. You can use the funds from a land development loan to install sewer and water lines as well as power lines to prepare the land for development.

Can I Get Funding for the Labor and Materials for My Small Commercial Renovation?

Yes you can. An interim construction loan is a short-term loan that covers these costs. Typically, interim construction loans cover 18 to 36 months and can be paid off in a mortgage refinance.

If you have a commercial construction project coming up this year, now is the time to shop for financing. Contact the Legendary Capital Solutions team to find the right loan for your project.

Disclaimer: The contents of this website do not constitute financial advice and are provided for general information purposes only. If you require specific financial advice, you should contact a financial advisor. We can only advise on the basis of specific client instructions and are unable to offer financial advice by email to people who are not our clients. To learn how to become a client of Legendary Capital Solutions, please contact us.

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