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Cedric Jackson
By: cjackson
Read in 9 minutes

What Are Commercial Construction Loans?

If there weren’t commercial construction loans, the construction industry would grind to a halt.

Think about it, construction projects require:

  • Raw Materials
  • Tools and Equipment
  • Labor
  • Permits and Licenses
  • Insurance

That adds up to a lot of money, and it doesn’t even account for additional expenses that might come up. 

Most small business owners don’t have the cash on hand to fund these projects. They turn to commercial construction loans to get the financing they need.

And you don’t even need to own a construction company to qualify for one of these loans. You can also use the funds to expand your business.

There’s so much to learn about these commercial loans. Let’s dig in, so you can find out how this type of financing works and the available options.

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What Are Commercial Construction Loans?

Commercial construction loans are available to small businesses and huge corporations. 

These loans are used to:

  • Construct new buildings.
  • Transform existing residential properties into commercial properties.
  • Redevelop commercial properties.

Commercial Construction Loans vs. Regular Business Loans

Unlike a conventional business loan, with which you receive all the money at once, a commercial construction loan gives you only a part of the total amount as each stage of the construction project is completed.

This means that you must agree with your lender what this schedule is, so the loan funds are released when you need them. 

It is typical for the financial institution that gave you the loan to inspect the project periodically to verify that it is progressing according to the schedule.

How Do Commercial Construction Loans Work?

Here’s the deal, commercial construction loans can work in one of two ways. 

First, do you own a construction company? You can get a commercial construction loan to fund it. 

And get this. You can use this loan to pay for everything you need for your construction business, including:

  • Buying or leasing construction equipment.
  • Buying or renovating commercial real estate as part of a construction project.
  • Hiring and training a construction crew.
  • Handling the day-to-day costs of running your business.
  • Staying afloat while building on projects.
  • Starting a new construction business.
  • Expanding your current construction company.

Now that’s a lot of options! You can get your construction company running in no time with that kind of funding.

But wait …

You don’t own a construction business? Instead, you want to fund a construction project for your business, such as adding to your existing building or constructing a new office space.

No worries. This is an excellent option for you, too!

This loan can cover everything needed to go into the project, including:

  • Building Materials
  • Labor Cost
  • Land Purchase
  • Land Development 
  • Renovations, If Applicable

Once you have the cash, you can hire a construction company and have them start the project. It really is that easy!

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Types of Commercial Construction Loans 

You know you need the funding, but how should you get it? You have tons of options if you want to finance a commercial construction. 

Let’s dive deeper into commercial construction financing.

Commercial Construction Loan

Want to stick with a standard commercial construction loan? That’s an option, but there are a few things you need to know.

As we mentioned, you probably won’t get all the money at once. The lender will release specific amounts based on milestones. Hit a milestone, get some cash. 

Your lender will probably charge interest while the project is going on. Then, when the project is done, you’ll have to pay the entire loan off. 

Also, lenders consider construction projects to be high risk. You might need a credit score of 700 or higher to get approved. Some lenders will accept you if you’re in the high 600s, though.

This loan is only a good option if you need the money to finance a project, and you’ll get paid at the end. Otherwise, you’ll have a hard time coming up with that cash in time to pay it off. 

It seems a little rigid, doesn’t it? Don’t worry — there are some more flexible options. 

Such as…

SBA Loans

You might be eligible for a Small Business Administration loan. Did you know there are two types of SBA loans you can use to fund construction?

Do you have a small construction project? Consider an SBA 7(a) loan. 

Here are the details:

  • Borrow as much as $5 million.
  • Loan terms depend on the use — 10 years for working capital and 25 years for commercial real estate.
  • 10 to 20 percent down payment.

Is that one not right of you? How about the SBA CDC/504 loan? 

Here are the details:

  • Borrow up to $5 million for equipment, machinery, and real estate.
  • Terms that last 10 to 25 years.
  • 10 to 15 percent down payment.

Merchant Cash Advance (MCA)

Not everyone has good credit. But even if you have bad credit, you might also need a construction loan.

You might have a harder time getting it, though.

Some business owners choose a merchant cash advance to fund the project. 

So, here’s the thing. 

It’s not really a loan. It’s a cash advance based on your sales. 

The lender gives you the money upfront, and then you pay it back via a percentage of your credit card sales.

This is a short-term loan, and you can get approved even if your credit isn’t all that great. And as amazing as it sounds, it tends to be an expensive option.

You do need to have a robust business, though. If you’re just starting out and haven’t made many sales, you probably can’t get an MCA.

But don’t panic just yet. There’s one more option, and this could be the best one. 

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Camino Financial Loans Are Your Best Alternative

You can also get a small business loan with Camino Financial. Our motto is “No Business Left Behind,” and we back that up with our requirements. 

Check this out …

You can qualify for one of our small business loans if you:

  • Have been in business for nine months or longer.
  • Generate $2,500 a month or $30,000 a year in sales.
  • You can apply even if you don’t have a credit history.
  • Have an SSN or even an ITIN.

That’s some of the most accessible qualifications in the lending world. 

And it’s fast! You can get funding as fast as two business days. 

Even better yet, after 9 timely payments, you can graduate to a bigger loan with more time to pay, this way, you can completely satisfy your business needs!

If you’re looking for financing for your construction project, apply for a small business loan today!

Grow Your Business with a Loan

If you want to grow your business, commercial construction loans can help. Consider your borrowing options and then choose one that fits your needs. 

Look, operating a business in the United States is hard enough. Sometimes it can even seem impossible. That’s why Camino Financial is dedicated to helping business owners succeed, no matter the size of their business or where they come from.

Do you want to learn more about commercial construction loans? Keep reading:

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