Are you eager to get started on your 2023 capital projects? If so, you may find yourself also looking for ways to secure funding for those commercial construction projects. Commercial construction loans can help your business finance building expenses. This kind of business loan helps your company cover the cost of building or renovating structures. Depending on your role, financing can mean different things for different commercial property types.
A commercial construction loan can help you keep your balance sheet manageable during a build. Before the project gets off the ground, securing financing is an essential step. Construction costs have increased with inflation over the past few years. These increases could put a damper on your plans. Fortunately, there are ways to secure financing for commercial construction projects. Here are some of the top resources to help finance your 2023 project.
Traditional Commercial Construction Finance Option
The most traditional method of financing commercial construction projects is through traditional banks. Commercial banks, including community banks and credit unions, are a great source for different types of commercial property projects. Upon approval, the money is readily available, and the project can quickly get launched off the ground!
SBA Guaranteed Loans
Loans backed the Small Business Administration helps businesses get funding by setting guidelines for loans and reducing lender risk. The loan process often takes longer due to a prequalification process that entails more paperwork.
There are three types of SBA loans for construction projects.
- 7 (a) Loans
The 7(a)-loan program is the SBA’s most common loan program, which includes help for businesses with special requirements. The 7 (a)-loan can be used for the construction of a new building or renovation of existing building.
- 504 Loans
The 504-loan program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. This type of loan is a multi-purpose commercial construction finance loan that can be used to improve or modernize an existing facility.
Microloans can be used for a variety of purposes that help small businesses expand. Use them when you need less than $50,000 to rebuild, re-open, repair, enhance, or improve your small business.
Real Estate Crowdfunding
Real estate crowdfunding refers to the process of receiving funds from multiple investors. It is a popular new way to get started with minimal upfront investment. This commercial construction finance option relies on multiple investors. These investors, contribute to a pool of capital that is collectively sourced from others with similar interests. Real estate crowdfunding is typically used to expand and diversify one’s financial holding and is generally not used to fund the entire project.
Hard Money or Private Lenders
When it comes to a commercial project, hard money lenders may not be the ideal financing option but may be worth consideration. The lender is often a private investor but can also be a friend or colleague. This can modify the repayment terms since they are not the same as a traditional lender. Many consider this option to access funds quickly. Instead of weeks, the lender can get you the funds in days.
If you can commit to a longer timespan to locate funding, a capital campaign for commercial construction is a good option. Industries that utilize this option are typically churches or other non-profits. The benefit of a capital campaign is that the money is donated, so there is no repayment. The downside is your project can take months or years to break ground. The result will significantly impact future projects.
We hope the information has you exploring different types of commercial construction finance options. With your funding secured, your next step is to a secure a commercial general contractor.
Omni Commercial Group has provided commercial construction services in Illinois since 1985. During this time, Omni has built an exceptional team of skilled and dedicated professionals who take pride in their work, earning an outstanding reputation in the marketplace with clients, subcontractors, architects, and other construction professionals. For more information on how we can assist you with your next commercial construction project, contact us today.