Pennsylvania Commercial Construction Loans

No matter what type of commercial structure a borrower is planning to build, there is a commercial construction loan available to provide the financing. Generally, commercial loan lenders look for the builder to be able to provide at least 20 percent of the funding. They also need to have a reasonable expectation that the finished product will be more valuable than the property alone or the existing building.

When it comes to commercial construction loans, lenders will usually require a 10 year repayment structure. This applies to original construction. Mezzanine loans are the commercial equivalent of second mortgages and, instead of property as the guarantee, they usually require the borrower's company stock in case the borrower fails to pay. Note that most commercial lenders will not make a traditional second loan on a commercial construction or property loan.

Get Ready to Build
Before the loan is even applied for, the borrower must be working on making the appropriate "horizontal improvements" to the land. This can include verifying that the zoning is correct, or it can mean requesting a zoning variance or change. Clearing the ground, installing sewer lines, and power lines all cost money.

For these purposes, a land clearing and development loan may be needed, depending on the size and condition of the property. At the same time, the total cost of the construction will include what are called hard costs, the cost of the improvements (such as grading and concrete), and the actual materials used to construct the building or buildings.