Securing finance to build a new structure or business complex is a process associated with large sums of money and considerable professional projections. Also, the property price itself is not the only cost involved, as there are the concomitant fees, commissions and administrative charges. Then there is also the fact that property finance transactions are generally long term in nature, perhaps twenty years in duration. However, in cases where the structure has not yet come into existence, the commercial construction loans that are used are more sophisticated than a mere contract of sale.
The primary purpose of a commercial property is the production of revenue. Because this is so, the loan provider, often a commercial bank, has to determine if the property's projected revenue is sufficient to meet the loan's repayment structure or is suitably in proportion to the loan's size. A business analysis also needs to be instituted to satisfy the lender that the property's proposed utilization will result in the required income.
Once the feasibility of the project has been established, the borrower and the lender need to thrash out the terms and structure to be included in the financing agreement. A construction loan typically has more than one phase. Initially, there is a loan to cover the costs involved in the actual building process. Once the structure is operational, i. E. Producing the anticipated income, a longer term agreement commences to pay it off entirely. The transition between the two loans is made possible by what is known as a mini-perm loan.
In approving the agreement, the lender needs to assess the building contractor's history, capabilities and industry reputation. There also needs to be a verification of the contract price in relation to other similar projects, and this may require a detailed analysis of how the borrower or contractor intends to spend the available money.
In the absence of a standing structure, the lender also requires exhaustive technical information on the project, such as building specifications, the duration of the work, materials to be used, and all pertinent details that may be of use in approving the loan application.
It is sometimes extremely hard to gain approval from a bank or other institution for credit. Project initiators should therefore put together an informative business strategy which is substantiated by market research and data. If the project is seen as incompatible with prevailing market conditions the entire loan application may be rejected by bank analysts for that reason.
The construction of a new building, shopping mall or other structure is always a source of excitement and adds to the economic growth of its home region. Finalizing the finance in a professional, successful manner eases the task of the project's management and saves time in terms of project commencement.
The primary purpose of a commercial property is the production of revenue. Because this is so, the loan provider, often a commercial bank, has to determine if the property's projected revenue is sufficient to meet the loan's repayment structure or is suitably in proportion to the loan's size. A business analysis also needs to be instituted to satisfy the lender that the property's proposed utilization will result in the required income.
Once the feasibility of the project has been established, the borrower and the lender need to thrash out the terms and structure to be included in the financing agreement. A construction loan typically has more than one phase. Initially, there is a loan to cover the costs involved in the actual building process. Once the structure is operational, i. E. Producing the anticipated income, a longer term agreement commences to pay it off entirely. The transition between the two loans is made possible by what is known as a mini-perm loan.
In approving the agreement, the lender needs to assess the building contractor's history, capabilities and industry reputation. There also needs to be a verification of the contract price in relation to other similar projects, and this may require a detailed analysis of how the borrower or contractor intends to spend the available money.
In the absence of a standing structure, the lender also requires exhaustive technical information on the project, such as building specifications, the duration of the work, materials to be used, and all pertinent details that may be of use in approving the loan application.
It is sometimes extremely hard to gain approval from a bank or other institution for credit. Project initiators should therefore put together an informative business strategy which is substantiated by market research and data. If the project is seen as incompatible with prevailing market conditions the entire loan application may be rejected by bank analysts for that reason.
The construction of a new building, shopping mall or other structure is always a source of excitement and adds to the economic growth of its home region. Finalizing the finance in a professional, successful manner eases the task of the project's management and saves time in terms of project commencement.
About the Author:
Tom G. Honeycutt is a full-time real estate entrepreneur in Atlanta, GA. Tom helps readers by providing practical and useful knowledge to better understand lending choices. If you are looking for Commercial Bridge Finance Loans | Atlanta, GA He suggests you check out the website iFund International
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