West Virginia New Construction Loans

New Construction Loans in West Virginia
There are a number of reasons why business owners want to expand. Are you unhappy paying rent and want to build your own office? Do you own your own building and want to make renovations? Although expanding your business may be necessary, it could take thousands to millions of dollars to complete a new construction project. Many business owners do not have the funds to pay for a construction or renovation project. A commercial construction loan may be an ideal option for business owners looking to expand.

What is a Commercial Construction Loan?
A commercial construction loan is for business owners who want to construct a new building or renovate their existing building. Business owners who want to purchase a new commercial property can apply for a commercial mortgage. Commercial loans are made for business owners who want to renovate their existing office or construct a new building. You can use the funds from a new commercial construction loan to cover the expenses for land, materials, and labor.

How do Commercial Construction Loans Differ From Traditional Loans?
Commercial construction loans differ from traditional loans in several ways. With a traditional loan, the full amount is typically disbursed to the borrower in one payment. Once the payment has been issued, borrowers are responsible for paying the balance. Most traditional loans are repaid through a monthly payment that lasts at least 10 years.

Commercial construction loans do not issue the full amount to the borrower in one payment. Instead, the borrower is issued partial disbursements throughout the construction project. When you take out a commercial construction loan, you will meet with the lender to establish a draw schedule. A draw schedule sets certain milestones during the project. When each milestone is completed, partial funds will be issued to the borrower. For example, the first draw may be when the land is cleared, and the second draw could be when the foundation of the building is set. This process will continue until the project is complete and the full amount of the loan has been disbursed. To ensure the work has been completed, lenders may have an inspector visit the construction or renovation site.

Unlike traditional loans, commercial construction loans only require that the borrower pay interest on the amount that has been disbursed. For instance, when a borrower takes out a commercial construction loan for $500,000, but he or she has only received $100,000 of the loan amount, then the borrower is responsible for paying interest on $100,000.

When the project is complete, and the full amount of the loan has been disbursed, the borrower can pay the remaining balance in one balloon payment. However, those who don’t want to make one large payment can choose to take out a commercial mortgage. A commercial mortgage uses the construction/renovation property as collateral and allows the borrower to pay off the commercial loan with the funds from the commercial mortgage.

What are the Eligibility Requirements for a West Virginia New Construction Loan?
Those who are interested in taking out a commercial construction loan should have good credit. Although it will vary based on each lender, applicants should have a credit score that is at least in the high 600s. Lenders will also look at your debt-to-income ratio. Most lenders will want to see a debt-to-income ratio that is less than 43%.

If you want to know more about a new commercial construction loan in West Virginia, contact our team at Delancey Street. Our professionals are happy to provide you with further details about new commercial construction loans.

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