What You Need to Know About Financing Commercial Metal Buildings

When considering a commercial building project, one of the most crucial aspects is securing adequate financing. While both commercial metal buildings and traditional structures require funding, the financing process and available options can differ significantly. Here's a breakdown of those differences:

Initial Cost and Valuation:

Metal Buildings:

Generally, metal buildings boast lower initial construction costs due to prefabricated components, faster erection times, and reduced labor expenses. This cost-effectiveness can positively influence financing, as lenders may perceive lower risk.
Valuation can be based on the cost of materials and erection, which can be more predictable than traditional construction.

Traditional Structures:

Traditional construction, using materials like brick, concrete, and wood, often incurs higher upfront costs due to extensive on-site labor and material expenses.
Valuation may be more complex, considering factors like architectural design, unique materials, and intricate craftsmanship.

Financing Options and Considerations:

Lender Perception:

Lenders may view metal buildings as a practical and durable investment, particularly for industrial or warehousing purposes. Their standardized nature can simplify risk assessment.
Traditional structures may be perceived as having higher long-term value and aesthetic appeal, which can influence lender decisions. However, higher costs may also lead to greater scrutiny.

Loan Types:

Commercial Real Estate Loans: These are common for both types of buildings. However, loan terms and interest rates may vary based on the perceived risk and value of the property.
Construction Loans: These loans, designed for building projects, are essential for both metal and traditional structures. The disbursement of funds often follows construction progress.
Equipment Financing: For metal buildings, particularly those used for manufacturing or storage, some lenders may offer equipment financing for specialized components.
Rent-to-Own (RTO): some metal building providers offer RTO options, that can be easier for some business owners to access, than traditional financing.

Factors Affecting Financing:

Creditworthiness: A strong credit history is crucial for securing favorable loan terms, regardless of the building type.
Business Plan: A comprehensive business plan demonstrating the project's viability is essential.
Collateral: The property itself serves as collateral, and its appraised value significantly impacts loan approval.
Project Purpose: The intended use of the building influences lender decisions. Industrial or agricultural applications may favor metal buildings, while retail or office spaces may lean towards traditional designs.
Depreciation and Tax Incentives: Metal buildings can offer certain depreciation advantages, which can influence financial planning. Also energy efficient features of either type of building can lead to tax incentives.

Key Differences:

Cost-effectiveness: Metal buildings often have a financial advantage due to lower initial costs.
Construction Speed: The faster erection of metal buildings can lead to quicker occupancy and revenue generation, positively impacting loan repayment.
Durability and Maintenance: Metal buildings are known for their durability and low maintenance, which can reduce long-term operating costs and enhance their appeal to lenders.
Flexibility and Customization: While traditional structures offer design flexibility, metal buildings provide customization options for specific business needs.

Final Thoughts

While both commercial metal buildings and traditional structures require financing, their unique characteristics influence the process. Metal buildings often offer cost advantages and faster construction, which can positively impact loan approval and terms.

However, traditional structures remain a viable option for projects prioritizing architectural design and aesthetic appeal. Ultimately, the best financing option depends on the specific project requirements, business goals, and financial circumstances.