New Construction Loans

Written by Robert Mac
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New construction loans give your company the financing it needs to complete a construction project ... or at least the next stage of it. Generally, new construction loans are short-term. Since the time and cost of a construction project can swing greatly throughout the undertaking, lenders tend to give numerous smaller loans.

The financial industry is rife with very specific loans for very specific projects; there are temporary loans and 40-year loans, home improvement loans and auto loans. And each type of loan comes with its own restrictions, payback schedules, and quirks. New construction loans are no different; for qualified borrowers, they can be easy to get, while others may have no luck at all.

Qualifying for New Construction Loans

You might have the best plan for a project--say, an apartment building with dozens of profitable suites--but that doesn't mean a bank will lend you the money to build it. You might even have a summary of how much money the apartments will bring in, and how it will increase the value of the surrounding neighborhood. Still, no luck--no matter how great the project looks.

If you have no experience with a project of this scale, traditional lenders will turn you down--experience in building similar projects is a must. Banks and other financial institutions need to eliminate as much risk as possible when lending money, and a person with a great idea--but no proven track record--is a red flag. Even though a bank loan is not likely, there are other lenders who can supply the financing, but since you're a novice (and a risk), you'll have to pay higher interest rates.

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