There are two ways to finance construction projects. One of these methods involves utilizing two loans, a loan that covers the development phase of the project and a permanent loan. In most cases, the borrowers will utilize two different lenders for the construction and permanent loan. The second method involves utilizing a single “combination loan,” which means the loan will start out as a construction loan and become permanent when the development phase is complete.

Where To Get A Construction Loan?

It may be difficult to find a lender who is willing to offer only a construction loan. While it is possible to find a willing participant – a financial institution – you may need to shop around for a while, before landing a construction loan. Some financial institutions, especially commercial banks, are more adamant about making combination loans. Whatever the case may be, it will be in your best interest to do some research, before rushing out and applying for a construction or combination loan.

Which Loan Works Best?

There is genuinely no such thing as a “bad” loan when it comes to financing a construction project. In fact, some contractors will find the construction loan and permanent loan from different lenders satisfactory for their needs. Others will be totally satisfied with a combination loan.

When considering your options, you must take the time to do research. One thing is for sure separate loans will incur two closing costs and require twice the work. If you need assistance in making your decision, you can always turn to commercial litigation attorneys. These professionals will not only offer free consultations, but also have your back through the entire litigation process.

When it boils down to it, the choice is yours to make. So, make it carefully, as to avoid any potential risks or mistakes. It also a good idea to speak with several lenders to see which ones are willing to work with you to finance your construction project.

How Long Is A Construction Loan?

It is hard to determine how long a construction project will last. Before you even thinking of starting a construction project, you will need to figure out how long it will take you to complete your project. When it comes to construction projects, most lenders are only willing to offer a six-month or one-year loan. It is important to note that a construction loan carries an “adjustable interest rate,” which will reset either monthly or quarterly. Also, lenders will tack on a construction fee to cover the expenses in administering the loan.

Combination Loans

In most cases, a combination loan will be much easier to obtain than a construction loan and separate permanent loan. And, if you are lucky the lender will credit of the fees for the construction loan toward the permanent loan. Continue to shop around until you find a lender who is willing to offer this credit.

One set of closing costs and this credit is enough to encourage contractors and others to apply for a combination loan. Plus, you will only need to deal with one lender, which ensures the process will go smoothly.


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