Best Loan Options for Businesses Expansion

  • March 8, 2019

Best Commercial Construction Loans

Are you ready to expand your business? There is more than just one option to choose from, of course. Of the many financing options, there are some better than others for business expansion. It’s important to find the right financing method for your business, that’s why we’ve compiled the best commercial construction loan options for business expansion in this article.  

Best Alternatives to Traditional Loans to Expand your Business

Business’s growth is usually strongly tied to business loans, but sometimes those can be hard to get through traditional banks. Before we explore what the best alternatives to traditional loans are, let’s talk about traditional loans for a second. Traditional term loans are the most common type of loans available for business expansion. We are all familiar with those, you are lent a fixed amount, which you will pay back (plus interests and fees) over a fixed period of time. However, this type of loan works best if your business’s credit is optimal, your business revenue is high, and other financials look promising as well.  

Option 1: SBA 504 Loans

SBA 504 Loans are a great option for small business owners looking to purchase commercial real estate and equipment. SBA 504 Loans are designed to help small business owners, they include long-term repayment schedules and fixed interest rates that are set below traditional loans rates.

  • Maximum loan amount: Up to 15MM
  • Term: 10-year term up to 30-year amortization
  • Interest rates: 6.00- 6.75% (blended)
  • Speed: 1-2 Months

 

Option 2: Construction Loans

If you are a seasoned entrepreneur looking to further expand your business, either by building up hotel franchises, assisted living facilities, or multi-use office space, construction loans are the right option for you.

  • Maximum loan amount: Up to $30MM
  • Term: 3-24 months
  • Interest rates: 6.5% – 8.5%%
  • Speed: 2-4 months

 

Option 3: Bridge Loans

Bridge loans are short-term, ideal for refinancing due to deterioration, the purchase of distressed properties, or to take advantage of repositioning opportunities for stabilization. One of Bridge loans biggest advantage is that the monthly payment is usually low. Borrowers will only pay interest during the first 6-24 months, allowing them to have more cash on hand to handle other expenses.

  • Maximum loan amount: Up to $15MM
  • Term: 6 to 24 months
  • Interest rates: 8.00% – 10.00%
  • Speed: 2-6 weeks

Now that you know what the best alternatives to traditional loans are it’s time to decide which loan is the right loan for you and your business to grow.  

How to Select The Best Construction Loan Lender

With an application process that can be lengthy and complicated, it is important to choose a lender that is both experienced and trustworthy. Having the best construction loan lender will ensure that the process will go smoothly, and there will be less or zero complications. It is a must that the lender is communicative and easy to reach since you will be working alongside them for the duration of the loan. Before committing to working with a loan officer, make sure to ask them these important questions.

  • How long has your company offered construction loans?
  • Have you been involved in any other business expansion operations like this?
  • Do you use a voucher or draw disbursement system?

How long have you been working as a construction loan officer? Additionally, never settle with the first lender you meet, even if you liked the first one, make sure to explore every other available option. Shop around and learn what rates other lenders are offering. You can always go back and revisit the very first lender you met, but you can’t go back and find a better deal if you commit too soon.  

Applying for a Construction Real Estate Loan

Once you have been pre-approved, and the building got appraised within the lending limits, and you show up with full documentation, you will have no problems whatsoever to acquire the loan. If you are an owner-builder, you will have to convince the lender that you can, in fact, complete the Project on time and on a Budget. The more documentation you bring the better because costs overruns are the number one issue with seasoned builders. Given the chance of hiring a construction manager, you should take it, since it will help you put together a credible package thus securing the loan. To apply for a loan, in addition to standard information regarding your financial status, you’ll need the following:

  • Building lot details: a deed or offer to purchase
  • A description of the architect responsibilities, general contractor, construction manager, or yourself if you are an owner-builder
  • Details of the builder itself, insurance certificates, resume and banking references
  • Blueprints and specifications of the project
  • Materials listed in bank’s format
  • Signed construction contract, with all the relevant information. Start and completion dates, and provisions for change orders