There are many factors at play when it comes to commercial construction lending for companies looking to purchase additional investment properties, get into a new manufacturing facility, open new storefronts, or move into a new headquarters as their business continues to expand. Choosing the right banking partner to help you navigate a complicated process allows you to stay focused on growing your business. A community bank with an intimate knowledge of the local market can often help you get better commercial construction lending rates than a big national bank, and provide valuable insights along the way. Here are four things to keep in mind when approaching your next commercial construction project.
1. Be realistic about what you actually need.
Many successful businesses are incredibly adept when it comes to their core operations, but have limited experience with construction or owning commercial real estate in general. Thus, many businesses end up overestimating how much building they’ll really need. A good banking partner will walk you through the questions you should be asking yourself—how much building is too much? How big of a down payment is necessary? Does it even make sense for your business to make this investment? Seek out a banking partner that takes an active interest in helping you make the right decision for your individual situation.
2. Choose a bank that can work with you on tight timelines.
A banking partner that can take action quickly and get you a commercial construction loan approval on a tight turnaround can make all the difference in getting the perfect parcel of land, or taking advantage of a time-sensitive quote from your contractor of choice. While big national banks are notorious for slow approval processes—especially for the small- to mid-sized businesses that are often overlooked by large banking organizations—a community banking partner is often much more agile with the advice and approvals that can determine whether or not a deal goes through.
3. Make sure you’re up to date on the market.
While nobody has a crystal ball that can predict the future of the market, working with an accomplished and proven banking partner can better equip you with the knowledge you need to maintain a healthy, sustainable real-estate strategy. A competent banking partner will help you mitigate unnecessary risk, maintain proper financial ratios in your operating company, and make sure your contractors are following best practices and keeping costs in line.
4. Watch out for common pitfalls.
A seasoned community banking partner has often seen businesses make every mistake in the book, which is why partnering with an organization with an advanced knowledge of the local market is so essential. You’ll be able to avoid common issues like building an asset that’s oversupplied in the market, committing too much working capital to a real estate project and harming your operating company’s financial stability in the process, or ending up with material or mechanic’s liens that can lead to cost overruns. By working with your banking partner to formulate a long-term real estate strategy, you can make sure you’re not costing yourself money in the long run due to lack of foresight or experience.
If you’re considering taking out a commercial construction loan, make sure you’re partnering with a banking organization that can keep you up to date on everything you need to know to make the decisions that will set your business up for lasting success. Contact Altabank today to learn about all the ways we can make your next commercial real estate transaction seamless, stress-free—and most importantly, profitable in the long term. Member FDIC.