Understand Commercial Construction Loan Rates & the Approval Process Before Applying
Extensia Financial is a seasoned lender of commercial real estate loans. As such, we provide commercial construction loans within our core loan product offerings. Extensia’s commercial construction loans are designed to support growing businesses and preserve wealth by covering the upfront costs associated with commercial construction projects.
In short, construction loans typically finance construction, renovation or expansion of commercial buildings. Most are short-term loans, usually lasting the length of the project, compared to traditional mortgages for homes, which last 15 to 30 years.
Before submitting an application for this specific financing option, it’s important to understand commercial construction loan rates, the approval process, the three major types and the best construction loan lenders available.
How to Get a Commercial Construction Loan
Step 1: Determine project specifications and gather documentation.
Loan lenders will want to know the location, construction phase and the expected date of completion. Gather a set of plans and specifications. Ensure you have received quotes for land, equipment, construction and related costs (legal fees, permits, municipal fees, closing costs).
Step 2: Establish the loan amount you need for the commercial project.
Step 3: Decide on the type of construction loan you need.
Read on for a breakdown of those options.
Step 4: Review eligibility requirements to determine qualification.
Step 5: Obtain necessary financial documentation, such as financial statements, personal and business lines of credit and tax returns.
Step 6: Compare monthly payments, interest rates and loan terms at several lenders.
Step 7: Complete the loan application at the preferred commercial mortgage lender.
3 Types of Construction Loans
- Construction-To-Permanent Mortgage
When construction is complete, the construction-to-permanent loan converts to a traditional mortgage, meaning business owners only have to pay closing costs once.
- Construction-Only Loan
A construction-only loan strictly covers the cost of construction. This option does not convert into a mortgage, meaning business owners must pay closing costs twice. However, they have the option to shop around for better interest rates or terms on commercial mortgages.
- Small Business Administration (SBA) Loan
The SBA offers two loans—504 and 7(a)—for commercial construction. Both loans can be used to construct new facilities and improve existing facilities and/or land, streets utilities, parking lots and landscaping.
Extensia Financial provides a SBA 504 1st Mortgage loan to renovate or build commercial real estate, offering entrepreneurs the opportunity to grow their business with reduced down payment and low long-term fixed rates.
What are Average Commercial Construction Loan Rates?
Commercial construction loan rates vary based on the type of loan, lender and the current market. For instance, the current SBA 504 loan carries interest rates ranging from 2.67% to 2.97% and provides a maximum of $5.5 million with three repayment term options: 10, 20 and 25 years. The SBA 7(a) loan has interest rates from 2.25% to 4.75% and provides up to $5 million in funding.
Extensia Financial has competitive commercial construction loan interest rates starting at 4.25%.
Commercial Construction Loan Calculator
To determine if you can afford the loan, calculate your monthly payments. Extensia Financial has a free commercial construction loan calculator available to provide monthly payment estimates. While this digital device is a great resource for estimated payments, it’s best to speak with a professional who can give a more accurate number.
Why Credit Unions are the Best Construction Loan Lenders
Credit unions are the best construction loan lenders because they offer value to the customer like no other financial institution. Credit unions provide personalized customer service, a wide variety of financial services, great interest rates, lower fees, insured deposits and more. If you work with a credit union to secure a construction loan, you’re likely getting the best interest rate available, along with low associated fees.
Extensia Financial lending experts work directly with credit unions to provide commercial construction loans. Our loan officers will guide borrowers and their credit unions through the entire loan approval process and provide ongoing support throughout the entirety of the construction project.
About Extensia Financial
Established in 1998 and headquartered in Simi Valley, CA, Extensia Financial offers competitive and collaborative commercial real estate loans. We partner with credit unions and connect them to investors across the United States. Additionally, we uniquely support and guide our partners through the entire full lifecycle of commercial construction loans. Extensia Financial is a proud member of the AVANA Family of Companies.