Commercial Real Estate & Construction Loans

When you're ready to build your own office building, expand or renovate one you currently own, your local credit union may be your best choice for financing. Not only is a credit union likely to have very competitive interest rates on commercial real estate loans or commercial construction loans, but they also will usually have extensive knowledge of economic conditions in your local area. At Space Coast Credit Union, we understand the local marketplace and focus on giving our business members the loan products, terms and interest rates they need to make their businesses a success. We can help you grow your business with great rates and local decision makers for prompt loan approval decisions.

Unlike a commercial mortgage for the purchase of an existing property, a commercial construction loan provides the funds you need for renovating your existing property or building a new one from the ground up. The commercial loan process involving construction often involves two loans: a short-term loan that finances the construction phase, and a long-term, permanent loan that's taken out after construction is completed. Usually, the long-term loan will pay off the initial short-term financing.
 
In general, a commercial construction loan does not provide the full amount of the loan up front, but has a draw schedule. You will work with your lender to create this schedule, which defines how funds will be released upon reaching certain milestones. These milestones are often tied to various points in the construction process when inspections are required, such as when plumbing or electrical systems have been installed. Once inspection is passed, the draw would be released. The full amount of the construction loan would be paid when the work associated with the milestone has been completed.
 

As with any loan, there are several factors that are considered when you're applying for a commercial construction loan. These may include:

• Credit score: Requirements vary, but your personal and business credit scores may be evaluated.
• Debt-to-income ratio: The lender will look at your business's debt and income per month and per year to determine this ratio and your debt service coverage ratio.
• Personal and business financial records: These may include tax returns, balance sheets, income statements and more.
• Construction plans: Detailed plans for your project may need to be reviewed by your lender.

If you're planning to build or renovate a commercial property, our Business Loan Advisors will be glad to answer your questions about the commercial construction loan process.

While residential mortgage loans may be for a term of 15, 25 or 30 years, commercial loans may range from five to 20 years. Note that residential loans are amortized over the life of the mortgage loan, which is repaid in full at the end of the term; commercial real estate loans may have short terms for the loan with a much longer amortization period, resulting in a final balloon payment of the balance of the loan. For more information about term lengths of commercial real estate loans from Space Coast Credit Union, contact us.

For information on the most current rates available, call us. 
 
You may also contact our team of Business Loan Advisors to learn more about our fixed- and variable-rate interest loans and the loan terms that are right for your business.

All of our business services are designed to help your business save money and operate more efficiently, and our commercial real estate and construction loan programs do just that. We offer commercial mortgage loan options for purchasing or financing owner-occupied properties and investor-owned properties, SBA 504 loans, and commercial construction loans for when you're ready to build, remodel or expand your property. Contact us to learn more about the loan program that's right for your business needs.
 

Depending upon your specific property and plans, a commercial construction loan provides financing for your needs throughout the process. These may include land development, labor, materials and more.

Down payments for commercial construction loans may be from 10 to 30 percent of the cost of the project. The loan-to-cost ratio is an important factor in commercial construction loans and it's calculated by dividing the loan amount by your project's total cost. Each lender will have its own requirements for its loan-to-cost ratio, but it is generally a maximum of 75 percent based on the appraised value.

Most types of loans have some fees associated with them, and commercial real estate and construction loans are no exception. Lenders may require upfront fees, some of which may need to be paid prior to loan approval and others that may be added to the overall loan amount. Depending on whether you are seeking a real estate or construction loan, loan costs may include survey fees, legal costs, the cost of a property appraisal, loan application and loan origination fees, and more.