How to Finance Your Commercial Building Construction Projects

If you are a general contractor for your own commercial building construction company, you know that it takes money upfront to complete a job. Therefore, you need financing to pay your vendors and then cash the profit only after construction is complete. This makes it essential that you find the funding option that works best for your company in the pre-construction phase. 

There are various funding options available for contractors and subcontractors; some will give you more flexibility for repayments than others. It’s important that you understand the scale and process of your commercial construction project and then review the funding options that work best for you. 

What Is Commercial Building Construction?

Commercial building construction is any building project that includes construction work for a building intended to be used commercially. This can include office buildings, hotels, grocery stores, shopping malls, universities, and more as long as the building’s final purpose is commercial. 

Commercial Construction on Large-Scale

When you talk about a large-scale commercial construction project, you’re building something along the lines of a shopping mall, hotel, airport, or government building. It requires heavy machinery and typically has multiple levels. 

Commercial Construction on Medium-Scale

A medium-scale commercial construction project can include expansion to already existing commercial buildings, such as adding a wing to a hospital or another floor to a hotel. These projects usually take anywhere from six months to a year to complete. 

Commercial Construction on Small-Scale

A small-scale commercial construction project is typically a renovation or remodeling when a retail location needs to adapt its space to a new use. These are generally short projects taking a couple of weeks or months. 

The Steps of the Commercial Construction Process

Each commercial construction project goes through several steps from start to finish of the project. These steps are essential to ensure the project runs smoothly. 

1. Development and Planning

During the development and planning stage, you find a location where you want to build. Also, you set a budget for the project based on expected expenses and the profits from selling or leasing the space after completion and prepare contract documents or work on the construction bidding of a project.

2. Design

During the design phase, structural engineers and other professionals like architects create a full set of drawings and the costs, quotes, and the project timeline. This phase creates a blueprint for the project. 

3. Procurement

In the procurement phase, you procure things to complete the project. This includes a building permit to construct the project along with needed supplies. You also hire the workers to do the physical labor and rental of heavy equipment. 

4. Construction

This phase takes the longest to complete. From breaking ground and installing electrical panels to putting on the roof and painting the walls, the construction phase is when you build your commercial building. 

5. Finished Product

Your commercial construction project is done. You’re ready to hand it over to the owners and get paid or start leasing it out to retail customers. This is also when you pay back the money you borrowed to fund the total project cost after this post-construction phase.

Budgeting a Commercial Building Construction Project

When you start a commercial building construction project, you need to budget for everything carefully. You don’t want any surprise expenses to throw off the project. These are the factors that affect the costs of a commercial construction project:

Location

Either you already own land, or you’re going to need to purchase land to build your commercial building. In some cases, the location might require rezoning, adding to the build time and budget. 

Building Type

It takes a lot less time and money to build an office building than it does a hotel. A hotel requires numerous bathrooms, smaller rooms, and individual electrical panels. For this reason, the building type plays a large part in the final budget for a commercial building construction project. 

Materials

From nail and drywalls to beams and roofing material, many materials go into building a commercial building. Therefore, you need to account for every item you think you’re going to need over the course of the project. Then, Billd can finance the supplies you need, and you can repay the monies when the project is complete. 

Finishes

Finishes include things such as flooring, paint, windows, insulation, and walls. These are things that turn your building into a usable space and not just a shell. Also, while the cost of nails is pretty much set, you can choose the flooring that’s expensive and other types that are budget-friendly. 

Labor

In some cases, labor costs more than the materials. You need to account for every hour of labor that it’ll take to complete the project, and remember that some labor costs more than others. For example, an electrician costs more than someone doing the framing. 

How to Finance a Commercial Building Construction Project

Most construction companies are going to need financing to start and finish a commercial building project, even if you’re doing it for a client. The client will pay a deposit, but this won’t cover the entire cost until it’s finished and you receive the final payment. 

Commercial Construction Loans

Some constructions go to the bank and apply for a traditional commercial construction loan. These loans offer low interest, and some don’t require payments until construction is complete. However, you need a top credit score to qualify. 

Business Credit Cards

If your company has business credit cards with high limits, you can put part of the building costs on your credit card. However, you’re responsible for monthly payments, and the interest rates are high. 

Alternative Financing

If you don’t have great credit and credit cards with high credit limits, there are other alternatives for financing. For example, Billd is a payment solution for commercial construction contractors and subcontractors that helps you get materials with flexible payment terms. By enrolling with Billd, you simply order the materials you need before a project, and they will pay your suppliers. Then, when you’re done building, you pay Billd the money back along with a small fee that you pay monthly only when you need to purchase materials with them. In addition, Billd is run by construction professionals, so they understand the pains of commercial construction contractors when it comes to financing materials upfront to bid for a project. 

FAQs About Commercial Building Construction

Here’s a look at some of the most common questions about commercial building construction:

What are the 3 types of construction?

The three types of construction are residential, institutional, and commercial. If you aren’t constructing buildings, infrastructure might be another type of construction, but it includes roads and bridges. 

What is Type 2 construction?

Type 2 construction is the construction of new buildings and renovations of older buildings that use non-combustible materials. 

How can you estimate a commercial building construction cost?

To quickly estimate the cost of a commercial building, you determine the price per square foot and then multiply that price by the expected number of square feet. 

How many types of commercial property are there?

There are six types of commercial property: industrial, retail, office, multi-dwelling units, hotels, and restaurants.

What is a commercial project?

A commercial construction project is any building project that includes the construction of a building intended to be used commercially. It can also include the renovations of a commercial property.

When you want to start a commercial building project, you need to go through the process. It’s also essential to arrange to fund. There are many options, including Billd, to cover the cost of building materials.

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