For many contractors, securing a commercial construction loan happens when stress levels are already high. The project has started and the crew is on-site or it is only a few days / weeks from starting. Payroll becomes an emergency — how will you pay your team while waiting for the GC to pay you? And how much time, and paperwork, is it going to take to get you the money you need?
There are multiple options for businesses looking for commercial construction financing, including contract financing, factoring, a merchant cash advance/daily debit and SBA loans, but there is no standard set of requirements for what you need in order to apply.
We developed this rough outline of documents and information you may be asked to provide when applying for commercial construction financing. Keep in mind, these may vary depending on the lender, your time in business, credit history and other factors.
Regardless of the type of loan you may want or apply for there is one thing that you should do in order to best help yourself get approved – be ready to tell your story. Your story should include the following:
- — What is your business and what do you do? Imagine you are speaking to a third grader and they need to understand and explain your business after they hear it from you. If a lender doesn’t understand what your business does, how it makes money, and what you need the money for they will have a very difficult time approving you for a loan.
- — Be ready to walk through how you got to the point you’re at right now and why you are seeking a loan.
- Your plan to repay the loan.
- — Be ready to walk through your current financial situation – income statement, balance sheet, tax returns, and bank statements.
- — Be honest, direct, and tell the Lender everything they need to know up front so there are no surprises throughout the process.
- — Good lenders will run checks and see the problems that exist – it is much better for them to hear about them from you before they find them out on their own.
You may not be the right fit for every lender and that is OK. Give every process you enter the same effort and energy because you never know which one will be right for you.
Applying for commercial construction financing
The first step in securing almost any type of funding is to complete an application with the lending institution. The important thing to know here is that application formats can vary. Some lenders, like us, only require a single-page application that can be filled out in no time. Others, like those that offer government-backed SBA loans, can require many separate forms totaling dozens of pages that take you (and an accountant) weeks to properly prepare.
At a minimum, applications for commercial construction loans typically ask for the following:
- Business name, address, phone number and Federal Tax ID number.
- Details about the business owners (name, contact info, marital status etc.).
- Work history, including amount of time in business, scope of work and references.
- If you have any current legal judgments or liens against the business or the business owners.
For more information about financial planning, bidding strategies and project management for your commercial construction company, download our free e-book.
Commercial construction loan documentation
Once your application is complete, you’ll need to submit the supporting documentation. This step varies greatly depending on the lender and type of financing, but generally ties in with the requirements of the application.
Here’s what we require:
- — 4 Most Recent Bank Statements
- — Year-End Income Statement & Balance Sheet for Past Two Years
- — Year-to-Date Income Statement & Balance Sheet
- — Tax Returns for the Last Two Years
- — Copy of your Contract
Most will also request professional licenses or government filings of your business, such as:
- — Contractor’s or trade license for the state you are working in
- — IRS Form stating your business’s Federal EIN Number.
- — Articles of Incorporation
You can learn more about commercial construction financing here. If you found this information helpful, don’t miss our bi-weekly newsletter, Built for Growth. Click here to subscribe.