Securing finance to build a new structure or business complex is a process associated with large sums of money and considerable professional projections. Also, the property price itself is not the only cost involved, as there are the concomitant fees, commissions and administrative charges. Then there is also the fact that property finance transactions are generally long term in nature, perhaps twenty years in duration. However, in cases where the structure has not yet come into existence, the commercial construction loans that are used are more sophisticated than a mere contract of sale.

The primary purpose of a commercial property is the production of revenue. Because this is so, the loan provider, often a commercial bank, has to determine if the property’s projected revenue is sufficient to meet the loan’s repayment structure or is suitably in proportion to the loan’s size. A business analysis also needs to be instituted to satisfy the lender that the property’s proposed utilization will result in the required income.

Once the project’s financial viability has been ascertained, the project management representatives and the bank (or other credit provider) need to negotiate the loan agreement’s terms and itinerary. A construction loan usually has more than one stage, as the structure it finances comes into existence during the course of the agreement. The loan’s first stage pays for the building process itself. Once that process is complete, and the structure is commercially employed, a much longer agreement commences which is used to cover the property’s entire price. The bridging agreement between the two stages is called a mini-perm agreement.

Before approving any such loan, the credit provider should examine the building contractor’s track record, professional competencies and industry status. The contract price also needs to be assessed in comparison with contemporary projects of a similar magnitude in order to see if it is competitive, and to this end project management should provide a comprehensive statement of the proposed construction’s costs, thereby justifying the requested loan amount.

In the absence of a standing structure, the lender also requires exhaustive technical information on the project, such as building specifications, the duration of the work, materials to be used, and all pertinent details that may be of use in approving the loan application.

Persuading a lender such as a bank to grant credit is not easy. Potential borrowers should therefore be able to provide a comprehensive business plan, supported by relevant market information. A project that is too ambitious or that has little or no basis in the existing market environment is unlikely to attract approval from lenders.

A new construction project is always an exciting prospect and is a stimulant for growth in the local economy. The professional processing and finalization of financing arrangements makes the project leadership’s job easier and saves time for both parties.

Tom G. Honeycutt is a full-time real estate entrepreneur in Atlanta, GA. Tom helps readers by providing practical and useful knowledge to better understand lending choices. If you are looking Commercial Property Lender Loans | Atlanta, GA He suggests you check out the website iFund International