What Do Banks Like To See When Asking For A Commercial Construction Loan?

What Do Banks Like To See When Asking For A Commercial Construction Loan?

by | Feb 22, 2024 | Ancon News

 

What do banks like to see when asking for a commercial construction loan?

 

If you’re planning to build a commercial property or undertake a major renovation project, you’ll likely need to secure financing through a commercial construction loan. These loans are specifically designed to cover the costs associated with commercial building projects and require a different set of documentation and requirements than a traditional business loan.

Here are some of the key factors that banks typically look for when considering a commercial construction loan application:

  1. A strong business plan: Banks will want to see a detailed business plan that outlines your project’s scope, including blueprints, architectural drawings, permits, contractor bids, and timelines. This plan should also include a detailed breakdown of the costs involved in the project, as well as an estimate of the property’s value upon completion.
  2. Strong credit history: As with any loan application, banks will want to see a solid credit history demonstrating your ability to make timely payments and manage debt responsibly. A high credit score and a low debt-to-income ratio can help increase your chances of being approved for a commercial construction loan.
  3. Adequate collateral: Commercial construction loans are typically considered riskier than traditional business loans, so banks may require additional collateral to secure the loan. This could include a lien on the property or other assets, such as a vehicle or investment account.
  4. Sufficient cash reserves: Banks will also want to see that you have enough cash reserves to cover unexpected expenses that may arise during the construction process. This could include things like delays in construction, unexpected material costs, or changes to the scope of the project.
  5. Experienced contractor: Banks will want to see that you’re working with an experienced and reputable contractor who has a track record of successfully completing similar projects. They typically require that the contractor be licensed and insured. Completing schematic drawings and understanding the actual construction cost can save time and additional questions from the bank’s underwriters. These documents should be included with your loan application.
  6. Proven track record: If you’re an established business owner, banks will want to see a proven track record of successful projects and profitability. This can help assure the lender that you have the experience and financial stability to manage a large-scale construction project.
  7. Projected cash flow: Banks will want to see that the property will generate sufficient cash flow to cover loan payments and operating expenses once the construction is complete. This could include projections of future rental income, sales revenue, or other revenue streams.

Securing a commercial construction loan requires a thorough and detailed application process. By working with a knowledgeable lender and providing all the necessary documentation and requirements, you can increase your chances of being approved for a commercial construction loan and successfully completing your building or renovation project.

Ancon Construction would love to help answer your commercial construction loan questions and learn more about your vision. A 100% Employee-Owned True Design-Build Construction firm since 1975. 

Let’s get your project started…together.

Learn how Ancon Construction’s True Design-Build process provides risk mitigation

Learn how Ancon Construction’s True Design-Build process provides risk mitigation

by | Dec 18, 2023 | Ancon News

 

Let’s start with the basics

What exactly is Design Build? Design-Build is a project delivery method that combines the design and construction phases of a project into a single contract. This method has gained popularity in recent years due to its ability to provide risk mitigation for project owners.

In general, the Design-Build approach is different from traditional construction delivery methods, such as Design-Bid-Build, where the owner hires a designer and a contractor separately. With Design-Build, the owner hires a single team that includes both the designer and the contractor. This team works together from the beginning of the project to the end, which ensures that everyone is on the same page, and the project goals are aligned.

In this blog post, we will explore how Ancon Construction’s True Design-Build delivery method provides risk mitigation and the benefits it offers.

Ancon Construction is a 100% employee-owned company that specializes in True Design-Build construction services, making it an ideal partner for clients who want to mitigate risks and ensure the success of their projects. Ancon’s in-house team of experts includes both designers and construction professionals, who work collaboratively to provide cost-effective solutions that meet the specific needs of each client. By taking responsibility for both the design and construction phases of a project, Ancon can better identify and mitigate risks throughout the project’s lifecycle. As a result, the team is better equipped to identify and mitigate risks throughout the project’s lifecycle.

Here are some ways Ancon’s True Design-Build team provides risk mitigation:

  1. Collaboration and Communication: Ancon’s in-house Design-Build approach emphasizes collaboration and communication between the design and construction teams. By working together, we can identify potential risks and develop strategies to mitigate them. This collaborative approach can help prevent costly delays and change orders down the line.
  2. Cost and Schedule Certainty: With Ancon’s True Design-Build process, the owner receives a fixed price for the project, which helps eliminate cost overruns. Additionally, since the design and construction teams are working together, they can develop a realistic schedule that takes into account potential challenges and risks.
  3. Quality Control: Ancon’s True Design-Build team is responsible for the quality of the project from start to finish. They have a vested interest in delivering a high-quality product, which helps ensure that the project meets and often exceeds the owner’s expectations.
  4. Single Point of Contact: With Ancon’s True Design-Build process, the owner has a single point of contact for the entire project. This simplifies communication and ensures that everyone is working towards the same goals.

Ancon Construction’s True Design-Build team provides risk mitigation by fostering collaboration and communication, delivering cost and schedule certainty, ensuring quality control, and providing a single point of contact for the owner. By hiring our True Design-Build team, owners can mitigate risks and ensure that their projects are completed on time, within budget, and to the desired quality standards.