South Carolina New Construction Loans
Business owners with growing companies come to a time when they may need to expand their business to succeed. There are some business owners who want to own their own office space as opposed to renting, and there are others who want to renovate their office building.
While expanding a business in South Carolina can lead to lucrative benefits down the road, it is a costly process. Commercial construction projects can take thousands to million of dollars to complete. Many business owners do not have the assets to pay out of pocket to complete a commercial construction or renovation project. Business owners in these situations may want to consider a commercial construction loan.
What is a South Carolina Commercial Construction Loan?
A commercial construction loan is used to pay for the costs that are associated with the renovation or construction of a building. Funds from a commercial construction loan can be used to pay for materials, labor, and the cost to purchase the land for a new building.
While commercial mortgages are designed for business owners who want to purchase existing properties, commercial construction loans are for business owners who want to construct a new building or renovate their current office space. A commercial construction loan can ease the burden of having to pay for the costs of the construction project out of pocket.
How Commercial Construction Loans Differ From Traditional Loans
A commercial construction loan in South Carolina differs from a traditional loan in several ways. With traditional loans, the funds are disbursed in one sum. After the loan has been issued to the borrower, he or she is responsible for paying the amount of the loan. Most loans have terms include a monthly payment over a period of at least 10 years.
Commercial construction loans do not issue the full amount at once. With commercial construction loans, the borrower is issued partial payment at certain periods in the project. When you take out a commercial construction loan, you will work with a lender to establish a draw schedule. A draw schedule determines how often the funds will be disbursed and typically takes place after a project milestone. For example, the first draw of a commercial construction loan may be to purchase the land for a new building, and the second draw could be after the foundation has been poured. Before the draw funds are released, many lenders send an inspector to confirm that the work has been completed. This process will continue until the construction/renovation project is finished.
What Happens Next?
After the construction or renovation project has been finished, borrowers have the option to pay the principle balance in one sum. However, business owners who don’t want to pay the full amount at once may have the option to take out a commercial mortgage. A commercial mortgage will use the property as collateral and allows the borrower to pay back the commercial construction loan with the funds that were received through the commercial mortgage. This lets borrowers make fixed monthly payments over a set period of time.
How to Prepare for a Commercial Construction Loan?
To prepare for a commercial business loan in South Carolina, you should have a business plan that shows lenders each step in the construction project. You should also include the cost of materials, labor, and other items. When you are applying for a commercial construction loan in South Carolina, lenders will look at your credit and your debt-to-income ratio. Business owners with good credit will have lower interest rates for commercial construction loans.