With the increasing number of housing developments propping up around the country, commercial construction loans have become more sought after.
The process of applying for the loan, coordinating communications among engineers and contractors, and ensuring the process runs smoothly can be complex. Here’s a brief outline to demystify some of the complexities of the commercial construction lending process.
It usually takes banks between one and two months to review the appraisal, so definitely do not delay in this step! The good news is that banks often order appraisals from an “approved appraiser,” and many banks share the same approved appraisers. If you do not end up doing business with the bank that initially ordered the appraisal, it is a simple process to redirect the appraisal to another bank and save time.
2. Budget Review
Banks meticulously inspect the detailed plans of your project to ensure that the project can be completed successfully with the amount of money in the borrower’s budget. Usually, third-party trained professionals are the ones who ultimately examine the budget.
3. Third Party Professionals
It is a good idea at this point in the process to obtain some other third-party professionals. Such professionals may include a legal consultant to hash out any legal issues and ensure all aspects of your project are compliant with any rules and regulations, and a geotechnical engineer to create a report on the area’s soil conditions.
4. Tenant Documents
The bank will eventually ask for any up-to-date information on tenants and leases, so make sure to have this ready. Lease subordination agreements and tenant certificates are some of the necessary documentation that the bank will ask for.
Later in the process, the bank will require insurance certifications and other reviews, such as flood hazard determination. Also have a zoning letter prepared, as the bank will likely request this as well.
Further along, the bank will require detailed documentation regarding building permits, the contracts of both general contractors and subcontractors, and other such information. You will also need to prepare a map of how the loan proceeds will be allocated to different aspects of the construction process.
Biz2Credit helps companies secure financing for commercial construction loans. Visit https://www.biz2credit.com/business-loan/commercial-real-estate-financing.