Construction loans, as the name implies, are borrowed to complete construction projects. Construction loans do carry higher interest rates; however, commercial construction projects tend to receive positive cash flows once the project is completed, making the investment worthwhile.
Construction loans are also sometimes referred to as story loans since some lenders require a detailed explanation of how the funds will be used.
There are various kinds of construction loans. The experts at Global Capital Partners Fund have covered the main kinds:
Land development loans
Land development loans are used to specifically improve an acquired piece of land. This includes construction, installation of equipment, and such. Land development loans are often utilized by businesses expanding their operations or those starting up. Land development loans are available for bank-owned properties and stalled sub-divisions.
Interim construction loan
An interim construction loan is one where the term loan and construction loan close simultaneously. The funds acquired pay for labor and material used on the property for its development. Such a loan transforms to permanent financing once construction is completed. Clients need to carefully consider the duration stated for construction or else they can end up paying more in interest payments.
Traditional financial institutions tend to shy away from risky commercial ventures. Construction loans are one such venture they are wary of. Traditional banks will therefore, not provide the entire amount required by the client to complete a project. They provide enough to get the wheels rolling. Businesses have to seek additional funds and that’s where takeout loans come in handy. Such loans provide permanent financing on projects.
Mini perm loan
Mini perm loan is one that provides temporary financing to settle any debt on a construction project. Let’s say a business acquired funds for completing an extension project and those funds fell short when the project was near completion, a mini perm loan can help settle such debt. It buys businesses more time to raise funds too.
Acquisition and development loan
This form of a loan has nothing to do with the acquisition with business. It is in fact, a loan borrowed to finance development on raw land. It can also be used for premises that just require updates too.
Global Capital Partners Fund provides all the construction loans your business needs. Acquire funds quickly with their expertise. They also provide bridge loans in New York and a range of commercial real estate financing options. Call +1-800-514-7350 for more information about their services.