Construction loans require special attention. They are somewhat complex and carry a modicum of risk. For these reasons, there is a smaller pool of lenders who make construction loans.
Our Georgia clients were experienced liquor store owners and operators. They had found a site in Georgia that looked promising for a new liquor store. After some delays securing local permitting, they were ready to secure financing.
Rick Patel worked closely with the clients. His advice was integral to securing general contractor approval. In addition, like most construction loans, this one also required multiple budget revisions. An accurate budget is critical, so the loan amount is sufficient for the entire construction process.
Important Aspects of Construction Loans:
• Clear, realistic business plan: Borrowers must assure lenders that they have a realistic business plan. That means they must have a strategy not only to build, but also to operate and manage a brand new business. Before even searching for a lender, spend the time to develop a coherent plan. Your plan should include a marketing analysis of the area, descriptions of competitors and why you think you can be successful. Sometimes GRP Capital will recommend that borrowers utilize a business consultant, who can produce a report that speaks the “lender language”.
• Finding an appropriate general contractor. Banks will want to vet your general contractor, just like they underwrite you as a borrower. To do this, they will want to ascertain that the GC has relevant experience and strong finances. Typically lenders will interview and request documents from the GC directly, which GRP Capital helps to facilitate.
• Careful underwriting: Lenders want to make sure borrowers have the capacity to repay the loan. In addition, an appraiser determines both the value of the land or building prior to construction (as is) and when the project is completed. The underwriting and appraisal process will often find aspects of the budget that have to be revised. As a result, construction loans often take a bit long longer to close.
• Permission to Build: Depending on your locality, there can be some bureaucracy. Obtaining permits to build as well as permission to operate the business often requires approval at the city or county level. Understand the permitting process, including the timeline.
Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.
- construction ,
- general contractor ,
- liquor store ,
- liquor store loan ,