Commercial Construction Loan
Very few commercial construction lenders would feel comfortable making a commercial construction loan today. Most commercial construction lenders would agree that commercial real estate is in a serious bear market. Rents are falling. Occupancy rates are way down. The market value of many commercial properties has fallen 40% from its peak.
If you need a commercial construction loan today, here are some helpful tips:
Commercial Construction Loan Tips
- Use a local commercial construction lender. Commercial construction loans are carefully monitored, and the bank will need to make several progress inspections every month. It is far easier for the commercial construction lender to make its progress inspections if the property is located within a few miles of the bank.
- You will need more skin in the game than a few years ago. Before approving a commercial construction loan request today, the bank will usually require the developer to cover 25% to 40% of the total cost. Therefore you will probably need to raise more equity capital.
- Match the size of your commercial construction loan request to the size of the bank. Take a small (less than $1 million) commercial construction loan to a small bank. Take a medium-sized deal ($1 million to $3 million) to a medium-sized bank ($1 billion to $10 billion in assets). Take a large commercial construction loan request (larger than $3MM) to a large bank ($10 billion+ in assets). You can find the asset size of any bank on the FDIC's website.
- Commercial banks make most commercial construction loans today. I wouldn't bother submitting your commercial construction loan to any life companies, REIT's, credit unions or hard money lenders.
- Use a commercial construction loan portal, like C-Loans.com, to speed up the process of submitting your loan to hundreds of different commercial construction lenders.
Download our important whitepaper, How to Place a Commercial Loan During the Great Commercial Lending Drought. It's free!
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