Commercial real estate investments can offer substantial returns, but traditional financing options may not always be readily available or suitable for every investor’s needs. In such cases, a commercial hard money loan can be a game-changer.

A commercial hard money loan is a type of short-term financing secured by a commercial property. Unlike traditional bank loans, which heavily rely on the borrower’s creditworthiness and financial history, hard money loans are primarily asset-based. They are typically provided by private lenders or investor groups who evaluate the potential value and profitability of the underlying property rather than focusing solely on the borrower’s qualifications.

What are the requirements for a construction loan
in California?

Construction loans in California can be an important tool in financing the next commercial construction project. But what are the requirements? They are minimum and easy to meet:

  • Down Payment

    To take a commercial construction loan, a down payment of at least 20% of the total expected project cost is required. In some cases, it may be possible to negotiate a lower down payment with the lender, but this will typically come with a higher interest rate.

  • Credit score

    In order to qualify for a commercial construction loan, business owners must have a good credit score. A score of 650 or above is considered to be good, while a score below 650 is considered to be riskier. Business owners with a riskier score may still be able to get a loan, but they may have to pay a higher interest rate. Furthermore, it is important to check your payment history and make sure that there are no negative reports or missed payments that could make you appear less reliable.

  • An experienced construction team

    The borrower needs to hire a professional construction team and provide the lender with the documentation that proves the builder is licensed and has a good reputation. This is important because the lender wants to be sure that the project is in good hands and that the money being loaned is being used wisely.

  • A detailed construction plan

    A borrower will have to provide a detailed project description with its budget and timeline. This step is highly important to secure the financing you need to make your dream home a reality.

What happens when you go over budget on a construction loan?

It’s important to have a realistic understanding of the costs and timeline for the project. If the project goes over budget on a construction loan, you’ll need to follow certain steps in order to find a solution:

  • Analyze your obligations, which means you need to carefully review your project contract in orderto estimate the risks
  • Consider additional funding opportunities
  • Negotiate the project details to revise the scope of work and decrease it if possible
  • Analyze mistakes to avoid for your upcoming building projects

How much time do I need to apply for commercial construction loans in California?

The amount of time it takes to apply for and receive commercial construction hard money loans in California can vary depending on a number of factors, including the type of loan you are applying for, the lender you are working with, and the complexity of your project. In general, however, it is typically possible to complete the application process within a few weeks. Once your loan is approved, the funds will be disbursed according to the schedule outlined in your loan agreement. If you have any questions about the timeline for your commercial construction loan, contact us, and we’ll provide you with more information.