Commercial Construction Loans
Are you a developer, investor or a builder seeking a construction loan for commercial property development, it’s important to compare options from various lenders, as terms and conditions can vary significantly.
Working with a specialised broker can help navigate the complexities of these loans.
Commercial Construction Loans?
A commercial construction loan is a short-term financing option used to fund the building of a commercial property. These loans cater to a variety of projects, including industrial and retail developments, as well as larger residential projects like townhouses and apartment buildings.
Commercial construction loans typically have shorter terms compared to traditional mortgages, usually ranging from 6 to 18 months depending on the project.
What is the maximum LVR for a commercial construction loan?
The maximum LVR for commercial construction loans is 70% and may consider higher LVRs in certain cases, especially with pre-sales in place. We offer a maximum Loan-to-Cost Ratio of 90%, which results in a lower equity contribution required from the developer.
What are the typical interest rates for construction loans?
The interest rates can vary significantly based on factors such as loan type (first mortgage, second mortgage, preferred equity), loan amount, loan-to-value ratio (LVR), and specific project details. Generally, first mortgage loans have lower interest rates, while second mortgages and preferred equity positions have higher rates due to increased risk.
How long are the loan terms?
Commercial construction loans typically have shorter terms, usually ranging from 6 to 18 months.
What costs does the loan cover?
Commercial construction loans typically cover:
- Hard costs: Materials, labor, equipment (usually about 80% of these costs)
- Soft costs: Permits, plans, inspections
What types of properties are used for commercial construction loans?
Commercial construction loans can be used for various types of properties, including:
- Industrial Properties:
- Warehouses
- Factories
- Manufacturing facilities
- Storage units
- Retail Properties:
- Shops
- Shopping centers
- Retail developments
- Office Buildings:
- New office constructions
- Office complex developments
- Larger Residential Projects:
- Townhouses
- Apartment buildings
- Commercial Developments:
- Mixed-use properties
- Business parks
- Specialized Commercial Properties:
- Hotels
- Restaurants
- Medical facilities
- Land development: Residential land lots
Types of construction funding we offer
We at Commercial property Loans offers several types of loans for commercial construction and property development:
- Senior debt loans: These are the primary loans for construction projects.
- Mezzanine debt loans: These are subordinate to senior debt and can help developers access additional funding.
- Preferred equity solutions: This type of financing sits between debt and equity in the capital stack.
- Construction loans: Specifically designed for funding construction projects, with features like:
- Loan-to-Value Ratio (LVR) of up to 70%, extendable to 75% with some pre-sales
- Loan amounts up to $10 million
- No pre-sales required in some cases
- Maximum Loan to Cost Ratio of 90%
- Site acquisition loans: For purchasing property for development.
- Completed stock loans: Also known as residual stock loans, for refinancing completed projects.
- Commercial property loans: Offering amounts up to $15 million.
We structure loans with features tailored to property developers’ needs, such as progressive drawdowns, flexible terms, and streamlined approval processes. They work with over 50 active debt and equity providers, including major and minor banks and mortgage trusts, to source appropriate financing solutions for each project.
Why use CPL for Construction Funding
Specialised expertise
CPL is a specialist in commercial construction finance, with a deep understanding of the unique needs and challenges of property development projects.
Range of loan products
They offer various loan types, including senior debt, mezzanine debt, and equity solutions, catering to different stages of a project’s lifecycle.
Streamlined process
They offer a simplified credit process focused on the property/project rather than an extensive interrogation of the sponsor’s ability to repay, which can be advantageous for developers.