How to Get the Most Out of a Construction Loan for Your Business

Securing a construction loan can help you grow and scale your business. Whether you want to improve your facility, remodel, or expand to a new office or warehouse space, a construction loan can help you achieve your goals.

However, the construction loan process and managing a construction project can be challenging. With the right lender and support from an expert team, you can get the most out of your loan. Below are a few tips to keep in mind to ensure the process goes smoothly from start to finish.

Determine Your Needs and Goals

Before applying for a construction loan, it’s essential to understand your business’s needs and goals. Determine the scope of your project, including:

• The type of construction (remodel, expansion, renovation)
• The total estimated cost
• The project timeline

Choose a Trusted Banking Partner

Finding the right lender is crucial. You’ll want a partner who has worked with clients on similar projects and has extensive construction lending experience. Experience will help later on as they guide you through vetting partners and references. The ideal banking partner will work with you from start to finish on the underwriting process and won’t shy away from being involved.

Secure Multiple Bids from Builders

Once the budget and your lender are determined, consider getting multiple bids to ensure the right pricing. Your trusted banking partner should help conduct a thorough review of builders. This includes vetting the following:

• Determining whether they’ve completed similar projects
• Evaluating their scope and size to assess their capability to execute the necessary work

Ask for References

Similarly, don’t hesitate to ask your potential general contractor and architect for references. Follow up on the references and ask questions like:

• What was your experience working with this partner?
• Was the project on time and within budget?
• Were there any challenges? How did they overcome them?

Review Contract Terms and Meet the Project Manager

Pay close attention to contract terms and work with your legal team to protect your business in case of increasing materials costs or cost overruns. As you review the contract, it’s also a good time to ask your general contractor how they handle change orders and for more information on what subcontractors they work with. Meet with the assigned project manager or site manager to ensure the partnership is a good fit.

Maintain Clear Communication

Effective communication with your lender, contractors and project team is crucial for a smooth construction process. Keep all stakeholders informed about the project’s status, any changes to the plan, and potential issues. Clear communication helps prevent misunderstandings and ensures everyone works towards the same goals.

Engaging in a construction loan can be a complex process, but with careful planning and execution, it can provide the financial boost your business needs to grow and thrive. By understanding your needs, choosing the right lender and vetting your partners and team, you can get the most out of your construction loan and set your business up for long-term success.

Want to learn more? Watch this video about how to avoid delays in your construction project.