What is the Difference Between Commercial Construction and Residential Construction Projects?

commercial-vs-residential-construction-funding

There are many ways to distinguish between different types of construction projects. For many businesses, especially when looking for a construction loan, it is important to understand the difference – and the grey areas – between two types of projects: Commercial Construction and Residential Construction.

Residential Construction vs. Commercial Construction

 

Residential Construction refers to projects that involve a single-family home or dwelling like an apartment, an individual condo or townhouse.

 

Commercial Construction covers essentially any other type of project, such as:

Education: Schools, colleges and universities

Entertainment: Casinos, concert halls, movie theaters, museums, amusement parks

Government: Police & fire stations, military bases, prisons, courthouses

Infrastructure: Roads, highways, bridges, retention dams, power lines, power stations and substations

Landscaping/ Sitework: Golf courses, parks, athletic fields

Lodging: Hotels, motels, resorts

Medical: Assisted living facilities, hospitals, medical offices, nursing homes

Retail: Supermarkets, convenience stores, fitness centers, shopping centers

Transportation: Airports, bus stations, parking garages, rail stations, subways

Other: Offices, data centers, bars, restaurants

Note: If a project involves a mixed-use building with both residential and commercial, it is typically considered commercial construction.

 

Why does it matter?

 

Whether you specialize in residential or commercial construction projects has an impact on the size and scope of your project and your business overall.

Commercial projects on average require larger and more expensive equipment, more employees, additional overhead costs and other components like payment/performance bonds. They are often funded by a government agency, corporation with bank financing, or by an owner/developer. The agency, owner or developer then hires a general contractor, who in turn hires subcontractors to do the work. 

Commercial Residential Construction Lending Flow

The majority of residential projects are paid by the homeowner, through cash on hand, insurance or a bank loan. In some cases, such as a natural disaster, they are paid for by a government agency like FEMA. Residential projects can involve interacting directly with homeowners or renters and are more often found through referrals than a competitive bidding process.

If your company is looking to make the transition from residential to commercial construction and you need funding for bond premiums, labor costs, materials or equipment leases, we may be able to help. Click here to reach a Mobilization Funding representative for a free consultation.

 

Read more:

What do I need to apply for a commercial construction loan?

What you need to know when bidding on commercial construction projects

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