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Wednesday, December 16, 2020
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Sunday, June 14, 2020
Commercial Construction Loan Financing
Many brokers will encounter clients who require construction loan financing, some more than others. Commercial construction loan financing is usually required by developers and investors who purchase land that they would like to develop or are purchasing fully developed land in the form of a single or several ready to build lots. Land with an existing home or structure on it is most often referred to as "infill construction". In the event that a builder is simply improving an existing structure including for example a top up (second storey) or remodelling, we refer to this type of construction as a renovation. All of these examples most often require construction funding and apply to either residential or commercial real estate.
There are several different types of construction loans. When a builder or developer acquires land for development they will seek out a land loan often combined with a facility for land development. The land loan serves to close the land purchase while the development loan serves to fund the planning and development of the land so as to improve it for greater use such as residential or commercial zoning from agricultural for example. Following the acquisition and initial development a developer or builder will require financing to service the land which includes the installation of sewer, water and hydro and will require a land servicing loan. The next round of financing is usually to a builder unless the builder and the developer are one and the same. The builder will require a construction loan to build either a residential or commercial building.
Here are some quick tips you may want to keep in mind if you are representing a client who requires development or construction loan financing.
Lenders who offer construction loan financing will always hold back 10% from every advance in accordance with the Construction Liens Act save and except an advance on land. Borrowers need to be made aware of this for budgeting purposes at the outset to ensure that there is no confusion in the future.
It is important that your client has a good budget that includes a detailed breakdown of hard and soft costs and includes the interest reserve in the soft costs.
Be prepared to use a quantity surveyor whose job will be to approve the budget on behalf of the lenders and provide reports on progress of construction to the lender that certifies every advance in accordance with the budget. For smaller residential construction loans some lenders will use an appraiser to report on progress.
In almost all cases, lenders will lend construction loans on a "cost to complete" basis. This means that the funding program will be advanced in progress draws and will also be subject to 10% holdbacks in accordance with the Construction Liens Act as previously mentioned. This ensures that there is always enough money in the remaining budget to complete the project.
The presence of a first mortgage that was obtained for construction purposes can create a challenge if your client plans to obtain second mortgage financing as the second mortgage lender would be required to postpone every advance under the first mortgage or construction loan that has priority on title.
Offering commercial construction loans can be very lucrative for a mortgage broker or agent. An opportunity to arrange this financing is an excellent opportunity to learn about how you can diversify the range of products you are able to offer to your clients. Either co-brokering the deal through an experienced broker who specializes in construction financing or working with a construction loan financing lender who is willing to educate you and walk you through a project is a great way to gain experience and to be able to offer this type of financing to your clients.
David Mandel is the Principal Broker and Founder of First Equity Financial Group that specializes in first and second residential mortgages as well as construction loan and commercial financing. To contact Dave call 888-455-5774 or visit www.firstequity.ca.
There are several different types of construction loans. When a builder or developer acquires land for development they will seek out a land loan often combined with a facility for land development. The land loan serves to close the land purchase while the development loan serves to fund the planning and development of the land so as to improve it for greater use such as residential or commercial zoning from agricultural for example. Following the acquisition and initial development a developer or builder will require financing to service the land which includes the installation of sewer, water and hydro and will require a land servicing loan. The next round of financing is usually to a builder unless the builder and the developer are one and the same. The builder will require a construction loan to build either a residential or commercial building.
Here are some quick tips you may want to keep in mind if you are representing a client who requires development or construction loan financing.
Lenders who offer construction loan financing will always hold back 10% from every advance in accordance with the Construction Liens Act save and except an advance on land. Borrowers need to be made aware of this for budgeting purposes at the outset to ensure that there is no confusion in the future.
It is important that your client has a good budget that includes a detailed breakdown of hard and soft costs and includes the interest reserve in the soft costs.
Be prepared to use a quantity surveyor whose job will be to approve the budget on behalf of the lenders and provide reports on progress of construction to the lender that certifies every advance in accordance with the budget. For smaller residential construction loans some lenders will use an appraiser to report on progress.
In almost all cases, lenders will lend construction loans on a "cost to complete" basis. This means that the funding program will be advanced in progress draws and will also be subject to 10% holdbacks in accordance with the Construction Liens Act as previously mentioned. This ensures that there is always enough money in the remaining budget to complete the project.
The presence of a first mortgage that was obtained for construction purposes can create a challenge if your client plans to obtain second mortgage financing as the second mortgage lender would be required to postpone every advance under the first mortgage or construction loan that has priority on title.
Offering commercial construction loans can be very lucrative for a mortgage broker or agent. An opportunity to arrange this financing is an excellent opportunity to learn about how you can diversify the range of products you are able to offer to your clients. Either co-brokering the deal through an experienced broker who specializes in construction financing or working with a construction loan financing lender who is willing to educate you and walk you through a project is a great way to gain experience and to be able to offer this type of financing to your clients.
David Mandel is the Principal Broker and Founder of First Equity Financial Group that specializes in first and second residential mortgages as well as construction loan and commercial financing. To contact Dave call 888-455-5774 or visit www.firstequity.ca.
Thursday, February 6, 2020
Why Startups Need Crowd funding?
As a business owner, capital is one of the most important requirements. Getting capital to start a business can be a very daunting task. Though there are many options to get the cash. Most of them req...
As a business owner, capital is one of the most important requirements. Getting capital to start a business can be a very daunting task. Though there are many options to get the cash. Most of them require some guarantee in return. Crowd funding is one of the best ways to get capital. Crowd funding in simple terms is a means that allows people to get Online fundraising for their projects by use of the internet. This is among the many reasons why each and every business needs crowd funding in the first place. Some of the other reasons include;
Feedback- Crowd funding exposes the business to the entire world. Once there is visibility, you are guaranteed some form of feedback. The feedback is most often very insightful. You will get wonderful ideas on how you can better yourself.
Exposure- This is one of the best ways to let the whole world know about the project. You will have a higher chance of getting partners and investors that will scale you to higher levels. It is a great way to sell ideas. You can decide to sell your ideas instead of going ahead with it.
Acquisition of customers- Since the business will be exposed to the entire world, you will have more customers. It is a good way of creating visibility for the business.
Testing- It is a good way of testing out the business. You will get to know how your market will be before you go full scale. Most people who have used this means to determine the validity of the business have never been let down. The business market place is a very tricky place that you need to go with all knowledge of what to expect. This is a good way of getting to know that.
Formation of partnership- This is a very good way of finding prospective partners for the business. When you expose the business to the world, people will most likely show interest.
Accelerated growth- Crowd funding is a very good way of speeding up the business growth. This is because not only will the customers be aware of what you have to offer but you may even get the best partners. Once you are aware of what the customers want, you will know what is most likely to move fast. This will help the business scale the heights of success in no time.
Fresh ideas- from this, you can get some of the best ideas to improve the business. There are people out there with some of the fresh ideas. You can use this as a means to interact with them and better your business.
There are some of the many reasons why Crowd funding is the best way to go. The only thing you have to do is make sure to go to the right place for crowd funding. This is most definitely the best place for you to get these services from. We will help you scale to heights of success when you let us handle your Crowd Funding needs.
As a business owner, capital is one of the most important requirements. Getting capital to start a business can be a very daunting task. Though there are many options to get the cash. Most of them require some guarantee in return. Crowd funding is one of the best ways to get capital. Crowd funding in simple terms is a means that allows people to get Online fundraising for their projects by use of the internet. This is among the many reasons why each and every business needs crowd funding in the first place. Some of the other reasons include;
Feedback- Crowd funding exposes the business to the entire world. Once there is visibility, you are guaranteed some form of feedback. The feedback is most often very insightful. You will get wonderful ideas on how you can better yourself.
Exposure- This is one of the best ways to let the whole world know about the project. You will have a higher chance of getting partners and investors that will scale you to higher levels. It is a great way to sell ideas. You can decide to sell your ideas instead of going ahead with it.
Acquisition of customers- Since the business will be exposed to the entire world, you will have more customers. It is a good way of creating visibility for the business.
Testing- It is a good way of testing out the business. You will get to know how your market will be before you go full scale. Most people who have used this means to determine the validity of the business have never been let down. The business market place is a very tricky place that you need to go with all knowledge of what to expect. This is a good way of getting to know that.
Formation of partnership- This is a very good way of finding prospective partners for the business. When you expose the business to the world, people will most likely show interest.
Accelerated growth- Crowd funding is a very good way of speeding up the business growth. This is because not only will the customers be aware of what you have to offer but you may even get the best partners. Once you are aware of what the customers want, you will know what is most likely to move fast. This will help the business scale the heights of success in no time.
Fresh ideas- from this, you can get some of the best ideas to improve the business. There are people out there with some of the fresh ideas. You can use this as a means to interact with them and better your business.
There are some of the many reasons why Crowd funding is the best way to go. The only thing you have to do is make sure to go to the right place for crowd funding. This is most definitely the best place for you to get these services from. We will help you scale to heights of success when you let us handle your Crowd Funding needs.
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