For instance, most commercial projects have two or more stages of development and each can have their own financing requirement.
An example would be where the project first requires financing to acquire the land. Once proper zoning and permitting is in place, the project would move to site development and from there move into building construction. Once the project is completed, a take out mortgage would likely be required if the project was being retained by the owner, or by a purchaser wishing to acquire the completed project.
Each of these stages, mostly because of timing, will require their own unique commercial construction financing facility.
And while the same property is used to secure the different construction loans or construction related loans, each incremental financing requirement may end up repaying the previous one, or there may be more than one charge against the property, provided there is enough value in the real estate to carry additional debt.
As a project goes along, the value will increase, which provides more security for additional lending required at each successive project phase.
For each new commercial construction loan acquired, there may also need to be an equity injection required in order to keep the debt equity ratio in line for the lender or lenders.
Because of the multi phase aspect of most commercial projects, its important that all commercial construction financing facilities are aligned so there is a seamless transition from one to another during the project life.
The more the entire commercial construction financing is planned out in advance, the less headaches and cash flow issues for the project and project owners and managers.
Further, the commercial construction loan draw process tends to longer and more difficult to manage as compared to a residential home build, so its also important that each construction financing facility is well aligned with the project cash flow and timelines.
If you are in search commercial construction financing for a project you are planning out, or one that you are in the middle of, I suggest that you give me a call so we can go over your requirements together and discuss relevant commercial construction loan options that can meet your needs.