Commercial Property Financing
As I found out recently by talking to Steve Canole, Vice President and Business Loan Officer at 1st State Bank, there aren’t as explicit criteria for securing a commercial construction loan as there are for residential mortgage financing. According to Steve, there are many more variables that lenders need to consider when reviewing a commercial property mortgage compared to a residential loan which is more stream lined. Primarily, these variables include whether it’s an investment property versus owner-occupied, the size of the project, the varied ways commercial real estate can be purchased and held, the various types of operating entities and how the owner chooses to operate and file taxes, and finally the loan/cost ratio of the project.
Necessary Documentation
The amount and type of information required when seeking bank financing varies depending on the bank and the proposed project, however Steve shared with me that you may be able to help the commercial loan process move more quickly if you have the following documents available at the onset of your application:
1. Three years of financials for the business entity. If in operation less than three, provide for the past two years. If financials are not CPA reviewed or audited, also provide a copy of your federal tax return for the years submitted.2. Interim financial statements for the most recent period prior to the application. Include with this, a corresponding interim financial statement from the previous year for comparison purposes.
3. Project budget with sources & uses of funds. Use of funds detail in some respect to the total cost of project (land, construction costs, etc). Source of funds will detail how you expect to finance total costs; loan and equity totals.
4. If income producing property is being purchased or built, you’ll need to provide a property cash flow summary.5. Short project summary - why is the project being undertaken; (e.g. business has outgrown current facility, leasing previously, long-term investment, etc).
6. For closely-held businesses, three years of federal 1040’s and a personal financial statement of each owner will normally be required.
7. If this is a new business venture or operation that’s only been in existence a short time, a business plan and financial projection will usually be required.
How Wolgast’s Design-Build System Can Help
Wolgast’s phased Design-Build construction service can help you with items 3 and 5 listed above. The documentation and estimated budget that we create during the first phase of our three phased system, provides substantial information to suffice any lender. In Phase I, our customers receive a complete needs analysis, schematic site plan, schematic floor plan, schematic building elevation, conceptual cost range, building code/zoning review, and building systems analysis (i.e. mechanical, electrical, structural).
Early budgeting is only one of the benefits of our Design-Build System, recipients also experience a quicker construction period, a.k.a fast-track, and they get one stop shopping for all their construction needs. It is truly a full-service method to deliver construction and we are proud of the customer service we offer to each of our clients.
You may also be interested in the following blogs about Design-Build Services:
You Have Construction Service Options
What Every Business Owner Should Know about Design-Build Construction
Ample Estimating Time Can Lower the Price of Construction
