Construction Loans:
A construction loan is given before a building is built up – it’s used for any number of expenses from acquiring land, paying architects fees, building materials, etc. The purpose here would be to ensure the business has the capital to build up the building (or pay for it as it goes) and not be in any debt before moving in.
Short-Term Loans:
This type of loan is not meant for lending but rather guaranteed by a credit card or other source. You can use these types of loans temporarily and repay them within a set timeframe. However, like with line-of-credit loans, it will only help your credit score if you do not miss or go overpayments.
What Are The Biggest Mistakes People Make When Applying For Commercial Loans?
When trying to get a loan, businesses’ biggest mistake is failing to consider all costs associated with opening or expanding their business. This includes plumbing fixtures or restaurant equipment (which should also be documented), initial inventory, first month’s rent, even decorating costs. Before you approach any lender, this must be considered because these expenses aren’t always included in your projections.
The other common mistake made by small business owners looking for capital is underestimating how much they need. It’s tempting to think, “I only need a little bit to get started” or “I never want to owe anybody money so that I won’t go for the whole shebang.” That’s a tremendous philosophical standpoint, but it doesn’t work that way in practice. Most banks understand this and will look at a number you’re sure is a little too high – then suggest something even more significant.