Michigan New Construction Loans
New Construction Loans in Michigan
When you have reached a certain point in with your business, it may be time to expand. Some business owners may want to renovate their own office space, and there are others who want to build an office so that they no longer have to pay rent.
While a commercial construction project is an investment that can help your business, they are expensive to complete. Most commercial construction projects take thousands to millions of dollars to complete, and many business owners do not have the assets to cover the costs of a construction project. In these circumstances, a new commercial construction loan could be a beneficial tool.
What is a Commercial Construction Loan?
Michigan business owners who want to renovate an existing commercial property or build from the ground up can apply for a commercial construction loan. The funds from this type of loan can be used to pay for materials, labor, property, and other expenses. Business owners who want to purchase an existing property will need to apply for a commercial mortgage.
How do Commercial Construction Loans in Michigan Work?
Commercial construction loans differ from other loans in many ways. With regular loans, the borrower will be issued one payment. Once the payment has been disbursed, it is the responsibility of the borrower to pay the balance of the loan. Most loans, such as a commercial mortgage, will require a monthly repayment period that is 10 years or longer.
Those who take out a commercial construction loan will receive payments throughout the course of the construction or renovation project. Payments will be established through a draw schedule. When you take out a commercial construction loan, you will meet with the lender to create a draw schedule. This will set certain milestones to determine when the payments will be disbursed. The first draw may be when the land has been cleared for development, and the second draw could be when the foundation has been poured. With each milestone, lenders will probably send an inspector to the construction or renovation site to confirm the milestone has been completed. This process will continue until the project is finished.
The loan can be paid off in one large payment when the project is complete. This payment will cover the remaining principle, interest, and other fees. For those who don’t want to make one large payment, a commercial mortgage may be a useful tool. Borrowers can take out a commercial mortgage and use the funds from a commercial mortgage to pay off the remaining balance of the loan. The new building or renovated space will be used as collateral. It is an ideal option for those who want to repay the loan through fixed monthly payments.
Most commercial construction loan borrowers can expect interest rates that fall between 4% and 12%. Because a commercial construction loan is considered high-risk to the lender, a down payment is typically required. Most down payments for commercial construction loans can range between 10% to 30% of the total cost of the project.
How to Prepare for a New Commercial Construction Loan Application
During the application process, lenders typically want to see a plan that outlines each step in the construction or renovation project. Lenders will also want to see cost estimates for materials, property, labor, and other expenses that are associated with the project.
Are you interested in leaning more about new commercial construction loans in Michigan? We welcome you to contact our team at Delancey Street. Our professionals will be happy to provide you with further details about new commercial loans.