CONSTRUCTION LOANS
Construction loans are a flexible solution for businesses looking to expand or renovate. These require approval of reputable contractor and building plans before beginning, but once approved will pay based on milestones achieved in construction process.
Since the property hasn’t been completed yet, there’s no collateral to secure the loan. So, lenders may charge higher interest rates and require substantial documentation to approve the loan application. Borrowers should have a good
credit history, a well-defined construction plan, and a strong payment history.
Overview
Construction loans are an excellent way to expand your business because they offer much needed funds when you most need them. With these types of financing options there’s no risk involved in trying new territory or adding onto an existing property everything can go smoothly.
Construction loans are perfect for the person who wants to make sure they have control over their budget. The milestones system means that you won’t be stuck
paying back a large sum if things go wrong, only what’s approved at each stage of progress which is usually much less.
Because the property has not yet been completed, there is no collateral to secure
this loan. Lenders may charge higher interest rates and require substantial
documentation for approval of their applications however, borrowers should have
a good credit history with well defined construction plans that are approved before applying so they can get financing quickly.
LOAN HIGHLIGHTS
- Construction loans are a great way to finance the construction or expansion of existing property.
- It is important for borrowers to find a reputable contractor with extensive documentation.
- The funds will be released when you reach certain milestones.
- Loans are considered risky for lenders because they don’t come with the security of cash or collateral.
Disadvantages
- In order to mitigate risk, lenders charge higher interest rates.
- Extensive documentation is required.
- The borrower is still responsible for the outstanding balance even if they fail to complete their project.
- Construction loans are a form of short-term lending. Property sale or permanent financing are necessary when construction is completed and approved.
Advantages
- Construction financing is the perfect way to acquire property for your company, boosting efficiency and improving profitability
- Instead of getting a large sum upfront, funding is based on milestones. This means you’re not tied down to one payment and can spread the cost over time - it's more affordable for your business.
- Construction loans can turn into long-term financing once the project is finished.
- Contractor vetting is important when it comes to construction. It ensures the project goes as planned, which means no surprises for you or your investors.
Quick Application
Use our five minute application to get a clear understanding of your funding options, terms, and interest rates.
