If you are in need of a commercial construction loan and need to find a bank that will back up your loan request, make sure that you put together a detailed proposal for the bank. A detailed proposal will help you secure the construction loan that you need.
#1 - Detailed Budget
The first thing that you need to draft is a detailed budget for the project. This budget should include the cost of constructing the property as well as equipment costs for anything that your company will be directly responsible for renting. Your budget should also include the soft costs that come with developing a property such as permits, inspections, title work, and other legal fees.
Make sure that this budget is not based on your own estimates but on real research. For example, your construction estimate should be based on the cost to build the building from various quotes that you got from construction companies and architecture firms. The soft budget should be based on looking up actual fees in the city where you want to put the building.
#2 - Land Location
Second, you need to know where you want to build the building. If you do not already own land, you are going to need to include the particular lots that you are looking at, as well as their cost, into your budget. You are also going to need to include any work that each lot will need into your proposal. For example, if one property is sloped and would require dirt to be moved around, you would want to include that information; if one piece of land has trees on it that need to be removed, you are going to want to include that information as well.
If you already own the land that you want to build on, then you will simply need to include a budget for leveling and clearing the land to get it ready for your building project.
#3 - Business Plan
Finally, if you have not worked with this bank before then you are also going to want to include a plan for your business with your loan materials. This business plan should lay out the exact steps that you will take to set up and market your business in this expanded location. Your business plan should show your profit and losses over the last few years, as well as how you plan on expanding on your profit at your new location. You need to be able to show that your business can afford to pay back the construction loan that it is taking out.
If you want to secure a commercial construction loan then you need to be prepared to share detailed information with the bank, such as the land location, building plan, and building budget, in addition to your plan for expanding your business.
Share27 July 2018
One thing I have always been good with is money. Even in high school, I always had a savings from my allowance and from working for the neighbors. I created this blog to help other young people understand the importance of financial responsibility even at a young age. If we start our adult lives knowing about financial responsibility, we can make it further in our lives before we suffer from the devastation of financial mistakes that can take years and years to pay back. Hopefully, what you learn here will help you avoid those financial mistakes and maybe help you recover from the ones you've already made.