Lacking adequate financing can delay a construction project. However, this should not be the case because you can easily secure financing for your building project. If the lack of adequate funds is delaying your construction project, here’s how you can secure financing for it.
Step1: Come Up with Project Specifications
When you approach a bank or a lender, you will be required to provide the specifications of your project. Some of the information that you will be asked to provide include the location of the land where you want to build, as well as, the costs associated with the land. You will also be required to provide a budget for the project. This includes the equipment costs, construction costs, and soft costs like legal fees, title works, municipal fees, and permits. The bank will also expect you to present a plan for the project.
Step 2: Bank Proposal Preparation
The lender will come up with a proposal that you will be asked to review. You can be given a loan to repay within 5 years. A small business or start-up can qualify for a Small Business Administration. Loan covenants are also included in the proposal. The terms of a loan vary depending on the project, service ratios, pre-payment penalties, and other factors.
Step 3: Proposal Acceptance and Appraisal
After accepting the proposal, an appraisal will be ordered by the lender. This can take between 4 and 6 weeks. The loan can only be issued based on the appraisal value of the project. That’s why an appraisal is very important when it comes to finalizing the agreement with the bank.
Step 4: Title Work
Your lender will ask for a clear title. That way, the bank will be assured of being a secured creditor. Therefore, secure any issues that may appear in your title search before closing.
Step 5: Closing
This is the final step of the process of securing project financing. Here, you sign your loan and start the construction project.