5 Steps That Can Help You Take a Construction Loan for a Commercial Property

While there are many financial institutions in India that offer construction loan for commercial properties, securing the loan can be a complicated process. In this post, we’ll have a look at five simple steps that can help a borrower get a commercial property construction loan.

Lack of adequate funds can delay your commercial construction process. A construction loan can be an excellent choice in such scenarios. Many financial institutions in India offer loans for construction of the commercial property.

But while there are several lenders, securing a loan can be a complicated process to navigate. Financing your commercial project involves requesting a loan from a reputed institution, reviewing the terms of the loan, obtaining the appraisal, title work, and closing of the loan. Let us have a detailed look at five important steps of this process.

1. Specifications of a project

Once you have selected a lender, the lender will first require the information mentioned below before preparing a proposal for your Construction Loan for Commercial Property-

• Location as well as the associated cost of the land if applicable

• The total budget of the project including the cost of construction, equipment, and other soft costs like legal fees, title work, municipal fees, insurance, permits, etc.

• A proper plan with all the specifications

2. Proposal from lender

Based on the information that you have provided, the lender will then work on a loan proposal if they have accepted your loan. The loan proposal is a non-binding term sheet with all the details about the loan. If you do not agree to any terms and conditions mentioned in the proposal, this is the time when you can get it changed. Once you are satisfied with the proposal, the loan request will then move to the underwriting process.

3. Underwriting

The underwriting process is when the lender compiles the detailed information and principals about the project. While you submit the brief project specifications in the initial phase, the lender would now ask you to submit detailed building plan, bids from contractors, cost projections, copies of local and state approval, construction timetable, financial history of the company, personal and company tax returns, etc. The lender might also order a detailed appraisal analysis and other professional reviews related to the project.

4. Title work

The last step is title work of the property. The lender would need a clear title to make sure that they are the first creditor. If the title search has any problems, they should be resolved before the loan closes finally.

5. Closing

Once the title work is done, the blender will give you a loan agreement which you need to sign, and the construction can then begin.

While the process of taking a commercial construction loan can sound daunting, especially if you are borrowing a loan for the first time, the simple steps mentioned above will make the whole process quick and simple for you.