A large percentage of loans in this category are obtained from local community or regional banks. Other lenders include life insurance companies, private investors and, more recently, crowdfunding. Because commercial building loans are not backed by a governmental agency such as Fannie Mae, you’ll find that you’ll be facing higher interest rates due to the increased risk that these lenders are taking on. Because of this increased risk, you’ll also find that these types of loans are more difficult to obtain.
This is, in general, what you should expect when trying to obtain a construction commercial building loan for a real estate development project from a bank. If you’re planning on holding onto the building, there are two loans that you will most likely procure. One is a short-term loan that finances the construction phase. The second one is long-term financing which occurs once the project is developed, leased and bringing in income. Your first step is to submit a request. If your project is considered, terms will be reviewed and negotiated before the lender undergoes the underwriting and approval process.
The underwriting process for a construction commercial building loan is extensive and often takes anywhere from 30 to 45 days. The lender will want to see your construction budget, tax returns, financial statements, credit report and creditworthiness, building plans and permits. They will take a look at the market and the property that will be used as collateral. They will also want to know your history as a general contractor or your development team if you are not a contractor. Once you’ve been approved, your loan will enter the closing process which is usually completed by both lender’s and borrower’s attorneys. These types of loans are usually dispersed as monthly draws which you will request based on costs.
As you can see, obtaining a construction loan from a bank can be an extensive ordeal. Contractors that require immediate capital or those that cannot pass the stringent requirements of a bank often turn to private hard money lenders. These individuals and groups usually specialize in various types of commercial real estate projects, some of which will be new ground-up construction. These types of loans are asset-based, though the asset does not necessarily have to be the particular property you’re developing. Because of this, they are not as risk-adverse and many do not rely on credit scores or creditworthiness.
Our construction loans offer monthly draws and, because we work with private investors, we are not bound by the same stringent FDIC and government mandated lending requirements of a traditional bank. In fact, loans are fairly easy to qualify for. We will need a copy of your budget, plans and permits and can fund up to $50 million. Call us today for a no-obligation quote.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.