Chicago Construction Financing and Commercial Loans
February 21st 2009
There are many new challenges which are increasingly evident with commercial mortgages, particularly those involving commercial construction loans. Many commercial financing experts currently project that the changing environment for working capital loans 
and most other business financing will produce several new but avoidable problems for small business owners.
There have always been complex problems for business owners to avoid when seeking commercial loans. By most accounts, these difficulties are now expected to multiply because we appear to be entering a period which will be characterized by even more uncertainties in the economy. Prior standards for commercial mortgages are likely to change suddenly and with little advance notice by lenders if the current financial turmoil continues.
This article will evaluate why commercial construction loans have become harder to obtain and will discuss possible commercial finance funding solutions. The current economic uncertainties combined with less capital availability for commercial mortgages in general and construction financing in particular means that it is much more likely that borrowers will need to look beyond their regional market area for business financing help. In many areas of the United States, virtually all business construction funding sources are effectively inactive at this time in addressing new loan requests.
Even before business finance funding options became more limited recently, construction loans were generally considered to be riskier than other commercial financing by most lenders. For a commercial lender, the most significant risk factors for commercial construction financing usually include the following: (1) until the new building is completed, a commercial property cannot produce income to repay a loan; (2) a substantial risk factor is the possibility for contractor liens; and (3) many commercial construction projects take more time to complete than originally projected and/or exceed initial cost estimates. Of these factors, the risk of potential contractor liens appears to be a particular concern for commercial lenders because of the deteriorating health of the construction industry. In any event, current delinquencies in loan payments for commercial construction financing are running well above normal.
Construction financing for homebuilders has always been viewed separately by lenders because the eventual owners of single-family homes are individuals rather than businesses. From a commercial lending perspective, it is likely that the current difficulties seen in residential construction are indirectly impacting the availability of construction funding for commercial properties because the potential for contractor liens incurred during residential projects can quickly reduce the financial stability of contractors involved in both residential and commercial construction projects. This is a further reason why lenders are increasingly focusing on the risk of contractor liens as a rationale for providing less construction financing.
The feasibility of real estate investments has traditionally included an enduring theme of "location, location and location" which reflects the importance of a specific locale for investing. This is still an important factor when lenders evaluate the prospects for commercial real estate loans involving both existing commercial properties and new construction. A lender is likely to be most comfortable with a stable to growing revenue stream for a business which will in turn result in a stable to growing property valuation, thus preserving collateral for the commercial mortgage loan.
For the first time in several years, however, we are generally seeing widespread reductions in both residential and commercial property values throughout much of the United States, with some areas of the country exhibiting more volatility than others. A severe recession will result in decreasing income for many businesses over an extended period of time, and it is very difficult for either lenders or borrowers to project when this downward trend will reverse. 
Given the difficulty of arranging financing based on location, using non-local lenders can be a practical solution for commercial financing involving both existing commercial properties and new construction. Small business owners should seek straightforward advice from a commercial loans expert who can provide effective strategies for changing and difficult business finance funding situations, especially in light of the challenging commercial borrowing climate prevailing currently.
The Chicago Architecture Blog: Hell Freezes Over: Lakeshore East …
Construction is scheduled to start around May-ish… assuming a construction loan can be landed by Magellan Development. Grocery shopping for the 10000 or so people who live in Lakeshore East is more than a little bit of a chore. Read more
Roundy’s plans store in Lakeshore East - Chicago Real Estate Daily
The Milwaukee-based grocer signed a lease this week for 55000 square feet that Lakeshore East’s developer says will enable the firm to obtain a construction loan for a low-rise retail building planned for just north of the residential … Read more…
Creative Loan Structure Boosts DuPont Fabros « Data Center Knowledge
DuPont Fabros worked out an agreement to effectively fold the Chicago construction loan into the accordion feature of the existing loan on ACC4. The CH1 facility was added as collateral, allowing DuPont Fabros to secure the extra $150 … Read more
Condominium Market in Chicago | Business News
One of the disadvantages of purchasing a new condo in a pre-construction Chicago development is that construction may not begin until many of the units are sold ahead of time… Read more
Chicago Business News, Analysis & Articles | Corus placed under …
The lender has suffered from what it has called "a rapid and precipitous decline" in the value of collateral securing condominium construction loans, including many in hard-hit Arizona, southern California, southern Florida and Nevada. … Read more
Tide of bad construction loans rises
Bad loans to Chicago-area real estate developers continued to pile up in the third quarter, a trend that’s expected to carry into next year as the recession deepens. The delinquency rate for construction loans in the area hit 13.7% in … Read more
Author: Stephen Bush
Learn about avoiding commercial financing mistakes - Stephen Bush is a commercial loans expert => AEX Commercial Mortgages and Working Capital Loans
Article Source: http://EzineArticles.com/?expert=Stephen_Bush
Mail this post
a LEED centric green materials market of approximately $10 billion. Increasing that number by 50% to account for non-LEED green material sales brings us to a grand total figure of $15 billion for 2006 - roughly on par with competing estimates and representing a reasonable green materials universe for the $2.2 billion subset of green materials addressed in this report.
we can’t touch on all of them in a single report and instead will focus on several of the major categories of building components where the sheer volume and value of materials demand attention. Each of the product segments listed below represents a target for green alternatives because each represents a significant source of existing revenue for building material vendors, green or otherwise.
and has been very deeply active in the Chicago construction market shares his findings, keeping everything confidential of course. 