How To Get A Commercial Construction Loan

Commercial Construction Loans are a crucial step in starting or expanding a business. Every business must have a workable space, but construction is expensive, whether you're building a new space or remodeling an existing one. A commercial construction loan is a short-term loan specifically designed to cover these costs.

Different lenders have diverse requirements, but there are some general steps most borrowers follow.

Step 1 - Gathering Paperwork

A commercial construction loan typically requires extra paperwork to support the actual loan application. The specific types of documentation vary depending on the lender, but most lenders will need:

  • A business plan - a document that describes what the business will do and how it will operate.
  • Earnings projections - an estimation of the earning potential for the new business, or the increase in earning potential for the expanded business. Usually a lender will want to see the earnings projections for a 24-month period. This can either be part of the business plan, or can be included in a separate document.
  • Contractor's estimates - these are estimates from the different construction contractors- plumbers, electricians, general contractors, etc. that state approximately how much the construction project will cost.
  • Personal or business financial documents - these are often needed to prove the stability of a company. For a new business, lenders may wish to see the borrowers' personal financial records, such as previous tax returns, personal credit reports and earnings statements. For an existing business, lenders may also wish to see the tax returns and earnings statements for the business itself.

Step 2 - Deciding On The Kind of Commercial Construction Loan Needed

Commercial construction loans can either be secured or unsecured. A secured loan means that the borrower provides some kind of collateral for the loan, and so often will have a lower rate or a better term because of the added security for the lender.

Step 3 - Selecting A Lender

Many different lenders offer commercial construction loans, such as federal Small Business Administration loans, private investments, commercial banks and credit unions. Every lender has different requirements and can offer different terms, so it is important for borrowers to research all potential offers before deciding which offer best suits their situation.

Step 4 - Filling Out Applications

After selecting a lender, a borrower then completes all the necessary paperwork for the application. Each lending institution will specify exactly what supporting paperwork it will require.

Step 5 - The Review Stage

A lender will then carefully review the application to evaluate the security of the loan based on the investors in the business, reasons for taking the loan, the employee or the partner strength of the business, or the age of the company. They may contact the borrower in order to request additional information about the proposed project, or about the business or proposed business itself.

Step 6 - Accepting The Commercial Construction Loan

If the lender approves a loan, they will provide the borrower with all information about the specific terms of the loan itself, including the payment plan and interest rates. Commercial construction loans are usually short-term loans with a different repayment plan than other standard loans, so it is important to read the terms carefully and to thoroughly understand the specific terms of the repayment plan.

For a list of commercial construction loan providers in your community, visit