Construction Financing: How Your Business Can Get Commercial Construction Loans

Building any kind of commercial building requires quite a bit of capital. Most developers don’t have that capital readily available, which is why it is common practice to apply for a commercial construction loan. 

From commercial modular buildings to full-scale construction, a commercial construction loan can give you the money you need for your next building project. However, knowing how to get a construction loan isn’t always common knowledge. 

Read on for information about commercial construction loans and ways that your business can get one.

 

Construction Loan for Commercial Building

A commercial construction loan is exactly what it sounds like: a loan that helps fund the costs of construction for a commercial building. There is rarely a limit to the type of commercial building that can be constructed with money from a construction loan. 

It is most common for a construction loan to be used for renovations or new, additional buildings. For example, a hospital may want to add modular offices on an undeveloped piece of land. 

Either way, commercial construction is a costly endeavor and even a little bit of help can go a long way. 

 

Construction Company Financing

There are two main types of commercial construction financing options: temporary and permanent. 

Temporary commercial construction loans, also known as interim loans, are short-term and last for about 18-36 months. These are usually used to cover the cost of labor and materials. 

Once a long-term mortgage loan is set up, the temporary loan will settle. 

Aside from the type of financing, there are a few different kinds of loans:

 

Commercial Construction Loan: Land Development Financing

A land development loan is given to those who own undeveloped land. This kind of loan would be used for vegetation clearing and land grading. A land development loan can also be used for water, power line and sewer installation.

Once the land is construction-ready, it can be subdivided and sold off or used for construction. A commercial building owner may use this loan to expand an existing building into or build an addition onto an adjacent lot. 

This is an excellent way for commercial owners to extend their reach and increase profit. 

 

Commercial Construction Loans: Developer Loans

Developer loans are also known as acquisition and development (A&D) loans. This kind of loan is typically used for land that is developed but is run-down or in need of some TLC.

As the name suggests, acquisition and development loans help to cover the initial purchase of the land and costs to develop and improve it. 

These costs may include land development tasks such as grading and vegetation removal. If there is a building already located on the land, then the costs could include demolition or foundation improvements. 

Developers and commercial building owners should consult with a commercial bank to determine if they are eligible for an A&D loan. 

 

Real Estate Development Loans

A real estate development loan is an umbrella term for loans that are used to develop buildings. This could include renovations, additions and new buildings such as modulars. 

On February 3rd, 2021, the United States shared the FEMA 100% cost share program. This allows schools and healthcare facilities to request full funding for projects that would support the safe reopening of these facilities. 

One of the eligible projects is modular construction. This eases the financial burden for many facilities that are currently facing space shortage. 

Want to learn more about this form of funding? Check out Education Funding: The CARES Act and School Portables.

 

How to Get a Commercial Loan for Construction Real Estate

Applying for any kind of loan can be a frustrating process. Knowing what to expect can make it easier. 

Here are some of the steps to getting a commercial loan for construction real estate:

1. Find a lender. Most banks and credit unions will provide commercial construction loans. 
2. Begin the application process. Provide a business plan, financial statements, credit scores, construction project plans and cost and other required documents and information.
3. The lender will evaluate what you have provided them with. This may take several weeks and they may ask for additional information.
4. The lender will approve your loan application and you will start the closing process. This will require negotiating terms and signing several documents.

The hardest part about applying for a loan is gathering all of the information and supporting documents that you need. 

Acquiring a construction plan and cost estimate alone can take weeks. Be sure to give yourself ample time to complete the process of obtaining construction financing. 

 

Construction Loans: Commercial Modular Construction

When commercial building owners and developers want to save money on new additions, they turn to commercial modular construction. 

One of the biggest industries that utilizes commercial modulars is education. Through education purchasing cooperatives, schools can get the space that they need for their growing student bodies. 

Due to COVID-19, offices and healthcare facilities are facing similar space issues. Providing extra square footage at a low cost is how modular construction companies are helping during the pandemic. 

Looking for education funding sources? Current government programs are offering a range of resources. Check out Education Funding: The Cares Act and School Portables to learn more.

Whether your commercial building is desperate for more space or just looking to expand at a reasonable price, commercial modular construction may be the solution for you. 

 

Buy Portables With Real Estate Construction Financing

Portables probably may not readily come to mind when brainstorming new structures. However, long gone are the days of small and plain portables. Now, you can find portables with all kinds of colors, sizes, dimensions and features. It is an excellent way to increase square footage and optimize the land that you have, without breaking the bank. 

With real estate developer loans, purchasing a portable is easy and cost-effective. Talk to a lender to find out more about applying for a developer loan for commercial modular construction. 

 

Commercial Construction Financing for Modular Construction

You may think that there aren’t any commercial modular structures available for your needs. However, there are all types of commercial buildings that modular construction companies can build for you. Using commercial construction financing and loans make the process even easier.

At Vesta Modular, we build modular solutions for schools, fire departments, healthcare facilities and more. Before you decide that modular won’t be able to fulfill your wants, talk to us first. Our experienced modular designers and construction team are ready to build a space that fits exactly what you are looking for. 

To get into contact with our team, give us a call at (817) 663-8527 or request a quote below.