CSC-Blog-Business-Construction-Loans_082021

How Business Construction Loans Work

The old saying you need to spend money to make money is certainly appropriate when you consider expanding or renovating your property or perhaps even constructing something new from the ground up. Of course, you may not have the money you need to pay for such improvements just laying around — so you need to familiarize yourself with business construction loans.

What and Why

Quite simply, business construction loans finance the costs associated with constructing or renovating a commercial building. The funds may be used for labor and materials, purchasing or developing land for a new commercial property, or renovating your existing property.

The “why” is straightforward as well: The price tag for new construction or renovations is fairly expensive, and most businesses don’t have a “spare” hundreds of thousands of dollars — or more — to complete the work. The question of where that money is coming from is answered by a business construction loan.

A Unique Structure

Most loans are structured so you receive the full amount upfront as a lump sum — but not business construction loans. With these, you’ll work with your lender to create a draw schedule, so portions of the loan are released as the project hits specific milestones, i.e., foundation poured, framing completed, etc.

The beauty of this arrangement is that you’ll only pay interest on the part of the loan proceeds you’ve received — not the entire amount. Once the whole amount has been disbursed, you can pay off the principal at the end of the project, or more commonly, secure a commercial mortgage, with the property being used as collateral.

 How to Apply

Construction loans are considered high risk, so you’ll need to provide prospective lenders with a detailed business plan that includes an overview of what you do, your financials, details about current operations, and future projections — along with specific details about the construction project. Your credit score will be pulled as part of the decision-making process as well.

Most lenders will take a minimum of several weeks to review all your information before they get back to you with an answer. And what do you do if that answer is no?

Working with an Alternative Lender

All lenders are not created alike, and that’s good news if your business construction loan application has been turned down by traditional lenders like banks. Working with a reliable lending partner like Clear Skies Capital will be a refreshing change because we seek reasons to say yes to you.

For many years, we have supported businesses that need alternative funding solutions. We’re here when the economy is strong, and we’re here when the economy is rebuilding like it is now. Our commitment is to do all we can to help businesses not just survive but thrive.

The Takeaway

Business construction loans can be an excellent financing alternative if you need funds to renovate or expand your existing property or support new construction. If this sounds like an attractive option to you, we invite you to contact us to discuss your situation and see how much you qualify for. You’re under no obligation.

Want to discuss business construction loans with experts who’ve helped countless owners over the years? Contact Clear Skies Capital at 1-800-230-9822 or visit us online to learn more.