Securing the right financing can be the deciding factor between a smooth build and a project delay. For developers, contractors, and business owners, a commercial construction loan offers the funding needed to purchase property, construct new buildings, or expand existing structures. Unlike standard business loans, these loans are for the complexities of construction, with unique funding schedules and repayment terms.
If you’re preparing to apply for a commercial construction loan, FinanceBoston Inc. can help. And, if you want a clear understanding of each stage, then this guide will walk you through the essential steps. With that, your project keeps moving from application to completion.
Meet with a Commercial Construction Loan Officer
The process begins with a meeting between the borrower and a loan officer. During this stage, the discussion covers all initial documentation requirements and the structure of the loan.
Specifically, three main differences between a commercial construction loan in Boston MA and a standard business loan are typically covered:
- Fund disbursement – Rather than receiving the entire loan amount upfront, you will get funds in stages according to a draw schedule, triggered by reaching construction milestones.
- Loan interest – Payments begin with interest-only installments, calculated on the amount of funds disbursed rather than the full approved loan balance.
- Repayment – Once construction is complete and funds are fully disbursed, the loan balance becomes due. Often, the borrowers transition to a commercial mortgage for longer repayment terms and smaller monthly payments.
Starting with this meeting ensures you have a clear picture of the timeline, requirements, and expectations before moving forward.
Provide Detailed Project Information
Loan officers need to assess the viability of the project before funding is approved. That requires a comprehensive set of construction documents and details, such as:
Building plans and specifications
Detailed construction budget
Material and labor cost breakdowns
Project timelines
Zoning approvals
Contracts with builders and subcontractors
Company operating history
Pro forma financial projections
And, providing these documents early helps the lender evaluate whether your project qualifies for financing and what loan options may be available.
Submit Financial Documentation For Commercial Construction Loan
Commercial Construction Financing
Financial transparency is key to demonstrating creditworthiness. Lenders typically request:
- Three years of business tax returns
- Personal financial statements from guarantors
- Balance sheets
- Profit and loss statements
- Bank statements
- Existing debt schedules
- Completed loan application forms
Consequently, providing complete and accurate records upfront can speed up underwriting and strengthen your case for approval.
Application Review
From the moment your application is submitted to final approval, the process can take around 30 days on average. During this time, lenders may request clarifications or additional documents to verify financial stability or project feasibility. Prompt responses can help avoid delays.
Commercial Construction Loan Approval
Once approved, you can access the funds you need to start work. A fast approval process helps you break ground sooner and move toward finishing your project.
At this stage, you review and agree on the terms, interest rates, and repayment conditions. Knowing these details will help you plan your construction budget and long-term financing with confidence.
Establish a Draw Schedule
The draw schedule is the agreed-upon timetable for fund disbursement, tied to project milestones. Using your submitted construction budget, the lender will create or adapt a schedule to outline when and how funds will be released.
This schedule allows the project team to pay subcontractors, suppliers, and other vendors promptly once they complete and verify specific work, such as framing, wiring, or interior finishes.
Commercial Construction Loan: Fund Disbursement
Loan officers or third-party inspectors release funds in phases according to the draw schedule. Before each release, they inspect the work for that phase and confirm its completion.
This system keeps the project on track, ensures the borrower uses funds for their intended purposes, and supports timely payments to contractors.
Ready to turn your blueprint into reality? Call FinanceBoston, Inc. today to secure your commercial construction loan. Get the funding you need to keep building without delays. Talk to a lending expert and start your project with confidence.
FAQs
How is a commercial construction loan different from a regular business loan?
A commercial construction loan provides funds in stages as you reach construction milestones. It charges interest only on the money disbursed and usually converts to a long-term mortgage when the project is complete.
How long does it take to get approved for a commercial construction loan?
The process usually takes about 30 days from application to approval, but providing complete documentation can shorten this timeline.
Do I need collateral for a commercial construction loan?
Yes, most lenders require the property being built or renovated to serve as collateral, along with possible additional guarantees depending on the project size and scope.
FinanceBoston, Inc.
33 Broad Street
Boston, MA 02109
617-861-2041
https://financeboston.com/
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