Commercial construction financing
As the name goes, commercial construction financing is nothing but the process of procuring the financial means that is required for the initiation of a commercial project. Since the construction of a commercial project would involve huge amounts of money it is not always easy or practical for the developer to put in all the cash by himself. This is why the whole concept of commercial construction financing has come up. As in any other fields of real estate development, loans for the purpose of commercial development are quite easy to get as long as the lending institutions do not have a doubt about the repayment capacity of the borrower.
However, this might not be the case for those people who do not have a good credit history or for those people who are just beginners in the field. This is because almost all banks and other financial institutions have strict rules when it comes to the lending of huge amounts of money. Process
Commercial construction financing can be received from a lot of sources depending on what type of a customer you are. Like in any other loan the borrower would have to collateralize some property with the lending institution as a guarantee. Some of the common sources from which commercial construction finances can be procured are mentioned here.
Commercial Bank It can be said that commercial banks are the largest lenders when it comes to financing commercial construction for multi-family housing. They lend money as loans having fixed interest rates.
Savings and Loan Associations These kind of lending institutions are the biggest lenders for the single family constructions. They give finances to multi-family commercial constructions as well.
Mutual Savings Bank Such a financial institution makes only a very limited number of commercial constructions financing in a year. But as they provide loans to mortgage bankers and other real estate development trusts they can also be said to be giving commercial construction financing.
Real Estate Investment Trusts They provide long term mortgages on multi-family and commercial construction projects. But the number of loans sanctioned in a year is generally less.
Many other sources like individual syndicates and other government organizations also provide commercial construction financing.
Advantages
Since almost any project which involves the construction of big commercial buildings would involve a lot of money, it is not always safe for the developer to invest all the cash by himself. Moreover, it might not always be possible for him to raise such huge amounts in the time available. It is therefore always easier and better to get a financier to fund your commercial construction. As long as the bankers feel that the contractor or the developer is someone who is financially responsible and bears a good reputation, there wont be any difficulty in getting the loan.
Disadvantages
In any other mortgage, commercial construction finance would also include collateral. Since the magnitude of money that is being borrowed is huge, the property that is being collateralized would also have to be of high value. So a default would result in the borrower suffering a major loss. Another disadvantage is that the interest rates associated with the loans would also be very high.
Other Articles
