Christian Commercial Construction Financing

Obtaining Christian commercial construction financing for a major multi-million dollar project can be a lengthy and arduous process. But the financial aspects, usually a combination of investment funds and loans, make it possible for shoppers to enjoy giant malls, tenants to reside in comfortable apartment complexes, and employees to work in large office buildings. Few hospitals, educational facilities, convention centers, theme parks, or hotels could be built if there weren't processes in place for gathering together the millions of dollars it costs for developers to build these major projects. The planning process itself may begin years before the first shovel breaks the ground. The developer needs to acquire land and obtain all the necessary governmental permits. Architectural designs need to be created, evaluated, and selected. To get the project from an idea to a completed building takes the efforts, creativity, and hard work of many people. The commercial construction financing is a crucial element of the entire process.

Depending on the project, the developer may need to work with municipal and/or state governmental agencies to get the go-ahead on construction. Environmental concerns may need to be addressed. For example, some governments require wetland mitigation as part of the land acquisition process. This can be a complex endeavor that involves working closely with a state's environmental protection agency and, perhaps, hiring professional consultants. Local governments have an interest and a stake in the building of nonprofit projects such as hospitals and convention centers. Public meetings may need to be scheduled to get input from the local citizens before the project can be approved. These are just a few of the issues that need to be taken into consideration as a timeline for the project is created. The developer also needs to consider the economic impact of these kinds of issues when going through the commercial construction financing application process. A carefully crafted budget will take into account such costs as land acquisition, architectural design, construction materials, labor, and other expenses.

Jesus once asked his audience: "For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, Saying, This man began to build, and was not able to finish" (Luke 14:28-30). A competent and conscientious developer doesn't want to be in that type of situation, either. A major construction project that remains unfinished is not only an eyesore; it's also an economic blight on a community. Developers have an obligation to "sit down and count the cost" before applying for commercial construction financing. Those who don't pay attention to the budgetary issues may not be in business for long.

Various lending institutions have different criteria for accepting a developer's loan application. However, almost every lender conducts the profit test the completed project needs to provide a profit for the developer. Lenders also look at certain ratios to determine eligibility. One of these ratios is the loan to value ratio. This means the amount of the loan as compared to the estimated value of the venture once it's completed. The common loan to value ratio is seventy-five percent. For example, if the estimated value is calculated at $100 million, the commercial construction financing lender will provide financing up to $75 million. Lenders may also look at the loan to cost ratio. This is a comparison of the loan amount to the cost of the venture. The most common loan to cost ratio ceiling is eighty-five percent, though some developers may be able to find some lending institutions willing to finance up to ninety percent of the project's cost. In addition, lenders may look at the developer's net worth and compare that to the requested loan amount.

If the amount approved by the lender is less than what is needed, the developer will need to seek additional commercial construction financing in the form of a mezzanine loan. This type of financing, designed for major projects, works similarly to a second mortgage on a personal residence. Instead of being secured by the actual building complex, however, the mezzanine loan is secured by stock in the company. If the loan goes into default, it's easier for the mezzanine lender to recoup losses with financing secured by stock instead of a physical asset such as a building. Those involved in mezzanine lending very seldom provide financing for less than $2 million. This type of financing option is reserved for especially large construction deals.

Of course, not all commercial construction financing is for giant projects. Some developers specialize in smaller ventures, such as a small office building or retail store. Others work with government programs and are financed, at least in part, with taxpayer dollars. For example, low income housing projects usually are a combination of both public and private funding. In addition to new construction, contractors also seek loans for major renovation and remodeling projects. Again, these may be financed solely through private means or, especially for buildings with some type of historic or community significance, through both private and public funding. The Small Business Administration, a federal agency, provides developers and contractors with preferred commercial construction financing lenders. The benefit of working with an SBA preferred lender is that the developer's loan application is processed efficiently and quickly. Obtaining construction financing is a long and arduous process, but a very necessary one if new hospitals, schools, offices, and apartment complexes are going to be built.

Christian Commercial Equipment Financing

Business owners often seek commercial equipment financing as part of an overall strategy for maximizing cash flow. Even a company with a healthy bank account may opt to finance major purchases rather than deplete the account. Savvy business owners and entrepreneurs know that a positive cash flow is vital if the company's doors are going to remain open. This is such an important element of stability and success that cash flow software programs have been created to help owners or their accounting department both to track cash flow and to make forecasts based on varying what-if scenarios. Unlike profit and loss statements, cash flow is determined by the amount of actual revenue received and expenses paid in a specific time period. A company's bottom line may show a profit because of sales that have been made, but still be operating at a loss because the customers bought on credit. A good software program can assist an owner or manager to make wise decisions when it comes to commercial equipment financing issues.

Commercial equipment, simply speaking, is the machines or tools used by a company in its business pursuits. Often such items are specialized according to the industry. For example, the medical and health professions use all kinds of specialized diagnostic machinery that are not used by other industries. Other industries utilize more common equipment and machinery, but manufactured to different specifications. As an example, most households have lawn mowers. But a landscaping company is not going to send its employees out to mow properties with a lawn mower from the local hardware store or nearest discount outlet. Their mowers will generally be larger and more powerful, specifically manufactured to withstand frequent and heavy-duty use. Similarly, almost every house and apartment has a stovetop and oven. But the stove tops and ovens in restaurants and such institutions as educational and medical facilities will be designed to meet the culinary needs for fixing multiple menu items for large groups of people. The commercial, heavy duty nature of such items is reflected in its higher price. Thus lending institutions have developed commercial equipment financing options for entrepreneurs and business owners.

For certain types of equipment within some industries, it may make more economic sense to lease instead of buy. Again, specialized medical equipment is extremely costly. Yet, technological advances in the industry can mean that a machine that was the must have one year may be obsolete the next. When obsolescence is a factor, leasing may be a more attractive option that buying the machine. Heavy-duty machinery, such as large building cranes, bulldozers, and tractors aren't subject to obsolescence. They are built to last and buyers expect them to last a long time. Seeking commercial equipment financing instead of leasing probably makes the most sense for these kinds of major purchases. Again, appropriate software applications can analyze and compare the cost benefits of buying or leasing a particular item. As the wisest man who ever lived once wrote: "Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding" (Proverbs 4:7). Utilizing the appropriate resources is a great way to get understanding and make wise financial decisions.

In addition to cash flow concerns and cost benefit analyses, the savvy business owner or accountant will also consider the tax advantages and disadvantages of commercial equipment financing or leasing. When a major piece of machinery is purchased, the company can take advantage of first year expensing when calculating taxes. After that, the item can be depreciated according to the rules and regulations of the Internal Revenue Service. An item that is leased cannot be depreciated. Instead, the costs of the lease are a business expense. The services of a tax professional may be needed to determine the tax advantages and disadvantages of either purchasing or leasing a particular piece of equipment or machinery.

The commercial equipment used in some industries can cost more than $100,000. These major purchases usually require some type of commercial equipment financing. As in purchasing any other big ticket item, such as a home or a vehicle, different lending institutions have different criteria and policies for approving applications for major commercial purchases. The applicant will want to research the several lenders to ensure that the company is getting the most favorable interest rate and terms. Some lenders may lend the needed funds using the particular item as collateral. But because this is an item that depreciates, or loses value over time, the lender may not offer one hundred percent commercial equipment financing on the item. The applicant may need to pay for a certain percentage of the item from the company's coffers. The lender may require several months of financial documents from the company before approving the loan. Owners that have a good credit history, depending on the size of the loan, may not be required to supply as much economic documentation as companies with poorer credit histories. Such factors as the size of the loan, the item being purchased, and the company's creditworthiness may also affect how long it takes the commercial loan to get approved.

As with personal auto and home mortgage loans, there are now online Christian companies that help potential applicants find lenders that can meet their need for commercial equipment financing. Some of these online resources can also assist companies in determining whether financing or leasing is the better option given the particular situation. Lending institutions also have websites that provide information about the loan products they offer. This information can be very helpful to applicants who can do online research before applying for financing with a particular company. As with every decision, entrepreneurs and business owners have a lot of financial issues to consider when it comes to purchasing major equipment and machinery for their companies. But the resources exist, including software programs and relevant websites, to help the savvy owners make wise decisions.





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