Feb 15, 201808:45 AMOpen Mic
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Need to finance a commercial construction project? Avoid these 4 common mistakes
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Construction and development depend heavily on having the financial strength to complete growth projects while maintaining stability. For many businesses, that may require a commercial loan to provide the resources necessary to transition into new facilities, add on to existing properties, or purchase land for future growth.
If that financing doesn’t go through, it can have devastating effects on a business. So, how can you improve your chances for securing your commercial construction loan? Let me give you an “insider’s view” of what banks look for in a successful application.
I suggest avoiding these common mistakes:
Mistake #1: Prioritizing passion over planning
We want to see that you’ve thought through all aspects of the business. Many business owners believe that banks want to see how committed they are to their product or service. In truth, passion for your work can sometimes lead to poor business decisions. Prove to us that your commercial construction project will add to your bottom line and create a return on your — and our — investment using a solid business plan that includes research and profit predictions.
Mistake #2: Underestimating experience
A track record of successful projects will work in your favor. Be sure to highlight past projects even if they are not part of your current project or business. You’ve heard the saying that the best predictor of future behavior is past behavior. We want to see your commercial construction résumé.
If you don’t have prior experience, then consider hiring a project manager with the expertise and track record you need to anticipate problems. Not only will that provide the experience you lack, it shows us you are aware of your shortcomings and are committed to correcting any issues.
Mistake #3: Unable to communicate your full ROI
Your return on investment may include items that are hard to quantify, such as operational efficiencies. Other examples include reputation or brand building. Are you looking at the big picture and able to understand the full impact of your project? Numbers are always nice, but even a conscious effort to delineate both the tangible and intangible results of your project show maturity and experience.