{"id":1640,"date":"2024-03-18T07:05:03","date_gmt":"2024-03-18T11:05:03","guid":{"rendered":"https:\/\/www.carltonbuildingservices.com\/?p=1640"},"modified":"2024-02-22T11:08:48","modified_gmt":"2024-02-22T16:08:48","slug":"how-to-get-a-loan-for-your-business-renovation","status":"publish","type":"post","link":"https:\/\/www.carltonbuildingservices.com\/how-to-get-a-loan-for-your-business-renovation\/","title":{"rendered":"How to Get a Loan for Your Business Renovation"},"content":{"rendered":"<p><span style=\"font-weight: 400\">Renovations, remodelings, and build-outs can transform your space, but they aren\u2019t cheap. The average renovation cost <\/span><a href=\"https:\/\/insights.cumming-group.com\/costs-per-unit\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">$290 to $1,230 per unit<\/span><\/a><span style=\"font-weight: 400\"> in 2023. The exact amount depends on the project type, your industry, and location, but even on the lower end, construction is a big financial investment.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">But before you exit out of this blog because you don\u2019t have $290 per unit laying around, there are other options. For many businesses in Virginia, a small business loan can help. Here&#8217;s the 411 on how to get a loan for your business renovation.\u00a0<\/span><\/p>\n<h2>What is a Renovation Loan?<\/h2>\n<p><span style=\"font-weight: 400\">Technically, there isn\u2019t such a thing as a \u201crenovation loan.\u201d Instead, multiple different types of loans can be used to fund a renovation. The two most popular include commercial real estate loans and small business loans.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Both have their pros and cons, which we\u2019ll outline below. No matter which option you choose, the funds can be used for renovations, build-outs, and remodelings in Virginia.<\/span><\/p>\n<h3><span style=\"font-weight: 400\">Commercial vs Residential<\/span><\/h3>\n<p><span style=\"font-weight: 400\">Before we dive into commercial real estate and small business loans, it\u2019s important to clarify one point: both of these loan types are for commercial properties.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Commercial loans apply to you if you plan to rent out:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">A space to other businesses (i.e., office buildings or <\/span><a href=\"https:\/\/www.carltonbuildingservices.com\/retail-renovation-in-2024\/\"><span style=\"font-weight: 400\">retail centers<\/span><\/a><span style=\"font-weight: 400\"> which your business will not operate out of)<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Spaces to families (i.e., condos, multifamily units, assisted living facilities)<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">A space where your business will operate, either as the sole tenant or one of many tenants\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">If you don\u2019t fall into one of these three categories, and are instead looking to renovate a residential property, commercial real estate and small business loans aren\u2019t for you. For residential loans, you can explore financing options with a residential contractor or your bank.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Commercial Real Estate Loans in Virginia<\/span><\/h2>\n<p><span style=\"font-weight: 400\">The <\/span><a href=\"https:\/\/law.lis.virginia.gov\/vacodefull\/title6.2\/chapter11\/article8\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">Code of Virginia Article 8<\/span><\/a><span style=\"font-weight: 400\"> is a bit vague about what constitutes a commercial real estate loan. Mainly, the law regulates how much of a project a bank is allowed to finance (50% if it\u2019s privately owned, 10-20% if state-affiliated). Loans must also be approved by a local commissioner before the work takes place, though your bank should take care of that process.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Because of the vague language, financial institutions often set the parameters for <\/span><a href=\"https:\/\/www.carltonbuildingservices.com\/commercial-real-estate-contractor-in-virginia\/\"><span style=\"font-weight: 400\">commercial real estate<\/span><\/a><span style=\"font-weight: 400\"> loans. The most common types include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><b>Construction Loans<\/b><span style=\"font-weight: 400\">: funds for new builds, build-outs, or renovations\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Investment Property Mortgages<\/b><span style=\"font-weight: 400\">: funds to invest or refinance investment properties, like office buildings or condo complexes<\/span><\/li>\n<li style=\"font-weight: 400\"><b>HUD Loans<\/b><span style=\"font-weight: 400\">: government-backed loans for multifamily properties<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Owner-Occupied Commercial Mortgages<\/b><span style=\"font-weight: 400\">: specific funds for buildings where at least 50% is utilized by the owner\u2019s business<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Short-Term Investment Real Estate Loans<\/b><span style=\"font-weight: 400\">: loans to acquire and renovate a real estate property with the intention to sell the property after or repay the loan quickly<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">These are the most common commercial real estate loans, though others exist. Often, commercial real estate loans come with high-interest rates, making them a better choice for larger companies or those who are comfortable with more risk.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Small Business Loans and Commercial Construction<\/span><\/h2>\n<p><span style=\"font-weight: 400\">Those looking for less risky loans should consider small business loans, if certain conditions are met.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">A <\/span><a href=\"https:\/\/law.lis.virginia.gov\/authorities\/virginia-small-business-financing-authority\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">small business loan for construction projects<\/span><\/a><span style=\"font-weight: 400\"> includes maintenance work, renovations, and build-outs. Often, small business loans are a great route because many nonprofits and banks help businesses utilize these loans effectively. Even the Small Business Administration, operated by the federal government, has multiple loans that can apply to construction.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Small business loans are also great if you need financing for other business investments alongside construction, such as investing in a new invoicing system or advertisements around town. <\/span><span style=\"font-weight: 400\">There are, however, two caveats with this loan type: it cannot be used on multi-family properties and the owner must operate a business on the renovated or newly constructed site.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Some amazing small business loans in Virginia to consider include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><a href=\"https:\/\/www.vedp.org\/incentive\/virginia-small-business-financing-authority-vsbfa\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">Virginia Small Business Financing Authority (VSBFA) Loan<\/span><\/a><span style=\"font-weight: 400\">: Virginia-specific loan for businesses with less than ten million in revenue, less than 250 employees, or qualification as a 501(c)(3) nonprofit entity<\/span><\/li>\n<li style=\"font-weight: 400\"><a href=\"https:\/\/www.sba.gov\/district\/virginia\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">U.S. Small Business Administration Loan<\/span><\/a><span style=\"font-weight: 400\">: federally-funded loan for small businesses operating out of Virginia\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><a href=\"https:\/\/www.sba.gov\/funding-programs\/loans\/504-loans\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">SBA 504 Loan<\/span><\/a><span style=\"font-weight: 400\">: a federally funded loan that\u2019s intended to support renovation, maintenance, and remodelings specifically.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Each of these loans has their own eligibility requirements, process for applying, and scheme to pay back the loan. To learn more, we recommend looking into each with a financial expert.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Loans and Your Contractor<\/span><\/h2>\n<p><span style=\"font-weight: 400\">We don\u2019t often picture a contractor as part of the loan process, other than to receive checks cut from the loan. While some contractors may play a minimal role in this process, a good contractor will work with you to understand your financing and help you lend more if necessary.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">This was the case for <\/span><a href=\"https:\/\/www.carltonbuildingservices.com\/case_studies\/two-maids-and-a-mop\/\"><span style=\"font-weight: 400\">Two Maids and a Mop,<\/span><\/a><span style=\"font-weight: 400\"> one of Carlton Building Services&#8217; clients. Previously, they had worked with a contractor who did not complete the job. When our team came in to finish it, there wasn\u2019t enough money left on their small business loan. Our team worked with them to extend the loan.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Obviously, our team doesn\u2019t cover finances, and you should consult with a bank about loans as well. But having a contractor who cares about the future of your business and helping you utilize your loan in the most effective way possible can be a huge asset.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n<h3><span style=\"font-weight: 400\">What is considered a small business?<\/span><\/h3>\n<p><a href=\"https:\/\/www.census.gov\/library\/stories\/2021\/01\/what-is-a-small-business.html#:~:text=It%20defines%20small%20business%20by,of%20%2416.5%20million%20or%20less.\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">According to the U.S. Census<\/span><\/a><span style=\"font-weight: 400\">, a small business is any company with less than 40 million in revenue or less than 1,500 employees. The exact classification that the U.S. government uses (employees or revenue) depends on the industry.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400\">How do I start a renovation?<\/span><\/h3>\n<p><span style=\"font-weight: 400\">If you\u2019re looking to complete a renovation for your business or commercial property, the first step is to interview different contractors. See which one you like the most in terms of their expertise, communication style, and ability to understand the vision for your business.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400\">Can I renovate my property on a small business loan?<\/span><\/h3>\n<p><span style=\"font-weight: 400\">The answer is usually yes, however you need to check the fine print on each specific loan. Generally, small business loans can be used for renovations if 50% of the property or more hosts your own business and it\u2019s not a multi-family unit.<\/span><span style=\"font-weight: 400\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Renovations, remodelings, and build-outs can transform your space, but they aren\u2019t cheap. The average renovation cost $290 to $1,230 per unit in 2023. The exact amount depends on the project type, your industry, and location, but even on the lower end, construction is a big financial investment.\u00a0 But before you exit out of this blog [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":1641,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[220,118],"acf":[],"_links":{"self":[{"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/posts\/1640"}],"collection":[{"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/comments?post=1640"}],"version-history":[{"count":2,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/posts\/1640\/revisions"}],"predecessor-version":[{"id":1643,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/posts\/1640\/revisions\/1643"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/media\/1641"}],"wp:attachment":[{"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/media?parent=1640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/categories?post=1640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.carltonbuildingservices.com\/wp-json\/wp\/v2\/tags?post=1640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}