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Your Business Needs Improvements? Try with Commercial Construction Loans

Written by Erick Copello Posted On Wednesday, 19 August 2020 20:29
Your Business Needs Improvements? Try with Commercial Construction Loans

The COVID-19 pandemic may have radically changed –at least for a short while– the way most businesses conduct their day-to-day activities as a result of lower foot traffic. 

One interesting way to take advantage of this temporary disruption is to finish off those remodels and modifications business owners may have been planning to do for a while but haven’t been able to complete to avoid closing down their businesses.

But perhaps using the business organically-generated cash flow doesn’t sound plausible due to the uncertainty resulting from the pandemic. That’s when commercial construction loans come in handy as a good alternative to start those pending projects while still handling the business’ finances conservatively as the virus situation subsides.

The following article explains in further detail what commercial construction loans are and how your business can benefit from taking one to improve its physical infrastructure. 

What are commercial construction loans?

Commercial construction loans are financing instruments specifically designed to provide funding for business owners who wish to build, remodel, or expand the physical premises of their establishments.

These loans can be compared to a mortgage, even though they are different, in terms of the length of the repayment periods as they can go as high as 25 years, to give the business enough time to generate positive cash flow out the investment.

Business owners can use commercial construction loans to cover the expenses associated with purchasing the required land, paying for labor costs, materials, and professional services, while they can also use them to buy the required furniture to give the establishment the well-polished look it deserves.

How can you use a commercial construction loan for your business?

There are three main purposes to take out a commercial construction loan:

1. Build

Businesses can use commercial construction loans whether they own or not the location in which they intend to establish their physical operations, as the purchase of the land or the commercial property can be included in the loan as well. Once the location is acquired, the commercial construction loan will also provide the funds required to start lifting walls and laying out the premises.

2. Renovate

For businesses that are already operating in a certain property, commercial construction loans can be used to modify the layout, décor, or the functionality of certain areas to improve the way the business looks and how it is set up to support the company’s day-to-day activities.

3. Expand

If your business is growing you may consider commercial construction loans as well, as you can employ the funds obtained from these financing instruments to buy additional land or to further expand your establishment within the property you have already acquired. By doing so, you will be giving your business the physical space it requires to operate if you are getting more clients or your warehousing needs have increased.

Where can you apply for a commercial construction loan? 

There are various alternatives in the United States for businesses considering taking a commercial construction loan. Some of the most common are: 

SBA CDC/ 504 Loans

These loans are partially guaranteed by the Small Business Administration (SBA) through Certified Development Companies (CDC). They are extended by traditional financial institutions and typically offer up to 20 years to be repaid.

Businesses can receive up to $5 million from these commercial construction loans and the interest rate varies depending on the business’ financial situation, the size of the project, and the benchmark interest rate. Fees charged by banks to approve these loans can go as high as 2.25% of the amount approved.

Wall Street Funding

This firm has already handed out around $100 million in commercial construction loans and other forms of financing for small businesses in the United States, helping them secure a competitive interest rate and offering a repayment period that ranges between four to 36 months.

Camino Financial

This California-based firm provides commercial construction loans that go from $5,000 to $400,000 to small businesses in the United States, with annual interest rates starting at 12% and fees ranging from 5% to 7% of the amount approved.

The best thing about this lender is that it will only take between two to 10 business days to get an answer about the loan and the repayment period ranges from six to 18 months.

Make your projects a reality

There is no reason why you can’t take advantage of the temporary disruption caused by the pandemic to finish off those renovations you have postponed for a while now.

By taking a commercial construction loan you will have enough funds to complete these projects and you’ll be able to welcome back your clients with a brand new look once this situation is put behind.

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