Construction loan is a short-term loan for the building construction on real estate property. Construction loans are usually not standardized so the lender must know more information about the planned construction before they will lend you money. This is known as a story loan, since the lender must know the story behind the construction project. The payments during construction are interest only payments and the full amount is due after completion of the project. The interest is usually a variable rate for construction loans.
The borrower and the lender must then create a schedule according to how much money is needed at each different stage of construction. The interest is then paid on the money that has been borrowed to date. Another thing the borrower and the lender must decide is what proportion of the whole project is the lender willing to lend. The land that the project is being build on can be used as equity on the construction loan as well, but only if it is owned by the borrower.
To find a funding source for a construction loan, the first place many would turn to would be a bank. Banks are a great source of capital, but they only lend to business with excellent credit and track records. If you are a fairly new business and have less than perfect credit scores, it will be nearly impossible for you to get funded by your bank. There are thousands of alternative funding sources out there that can help you with your need for capital. There are so many that it can seem like an impossible task in itself to find the right one for your business. We are here to help you find the capital that your business needs. Come search out database of over 4000 lenders and find one thats right for you.