How To Get Financing For Your Metal Building

Thinking about constructing a steel building soon?

Whether you are planning a residence or you want to build a farm, commercial, or industrial structure, you have made a great choice. Steel holds up great to the elements, requires minimal maintenance, and is a long-term affordable choice for any structure.

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But how do you pay to erect your metal building in the first place? In this financing guide, we tackle one of the most frequent questions we are asked.  Let’s take a look at your financing options and how you can go about getting the funds that you need.

Common Finance Options

1. Finance your steel building yourself 100%.
2. Go through a bank or credit union.
3. Try a mortgage broker.
4. Consider another alternative direct lender.
5. See if your steel building company will finance you.
6. Try for private funding.

Let’s go over each of these financing possibilities in more detail.

1. Finance your steel building yourself 100%.

If you can possibly pay for your metal building out of pocket, you should strongly consider it. You might question how you can afford that, but putting up a prefabricated steel structure is not nearly as expensive or complicated as you might imagine. You may even be able to handle some or all of the construction work yourself.

If you can pay for your steel building upfront, you will not be tied to a mortgage. That means you do not have to worry about interest payments, fees, or penalties. It will cost you less in the long run and it will simplify your life.

2. Go through a bank or credit union.

Your next option is to shop for financing through a bank or credit union. A good starting point would be the institution that you already bank with. Your bank or credit union is familiar with you and will take your customer record into account when making you a loan offer. This may make it faster and easier to process your application, and it may also result in better offers than you would get somewhere else.

3. Try a mortgage broker.

If you want to streamline the whole shopping-around process, one way to do it is to talk to a mortgage broker. Many offer free consultations. Once you describe your project goals and financial situation, the broker will be able to check with their network of lenders to see what you might qualify for. This is a great way to compare a bunch of loan offers all at once.

4. Consider another alternative direct lender.

On the other hand, going through a direct lender has its benefits as well, whether we’re talking about a bank or credit union or a mortgage bank or online lender. By cutting out the middle man, you may be able to qualify for better interest rates on your metal building construction loan. You can even go through a company which specializes in construction and understands the complexities and timetables associated with your project. Some lenders may even be willing to let you take out a business loan to cover your costs instead of a traditional mortgage.

5. See if your steel building company will finance you.

Another option is to check whether a steel building manufacturer or a steel supply company would be willing to fund your project. This can work out well because you are dealing directly with companies that understand—and are invested in—you launching your project. As such, they may be willing to offer you better rates. You also may not need to wade through quite as much paperwork.

6. Try for private funding.

You can also consider going with a private source for your financing. You have a wide range of options here. Private funding could entail anything from going through an accredited investor online to asking your family for a loan. Either way, this may give you access to much lower interest rates and greater flexibility with terms than you would find going through a regular bank.

Tips for Qualifying For A Steel Building Loan

Procuring metal building financing has become more difficult over the years. In order to have your loan application taken seriously, you need to make sure 1-that you are fully prepared to apply, and 2-that you are applying at the right place.

Here are some tips to help you succeed in obtaining the financing you need:

 #1 – Be willing to move your accounts.

It used to be a relatively simple matter to walk into a bank or credit union and get a loan, even if you were not an account holder there. Nowadays, however, lenders want you to be as involved with their companies as possible. They will be much more willing to consider extending you a loan for a metal building if you are willing to open accounts at their institution.

#2 – Familiarize yourself with the lender’s existing portfolio.

A lender which specializes in residential units but never constructs churches will be far more willing to consider a loan for a home than a church. Likewise, another lender which has provided financing for a lot of churches but which has had poor luck with farms and restaurants will be far more willing to lend you money to build a church than they would a restaurant or a farmhouse.

#3 – Know that loan terms these days are shorter.

A loan which carried a ten year term a decade ago is likely carrying a much shorter term today, like five years. Similarly, a five-year loan a few years ago would probably be a three-year loan today. Be prepared for this in advance so you are not caught off guard.

#4 – Have all your paperwork ready, including blueprints, specs, etc.

Getting your paperwork in order to prove your income and so forth is important no matter what type of loan you are applying for. But if you are applying for a construction loan, it is also vital to have the documentation pertaining to your project ready to go, including your blueprints.

Yes, this will require an upfront investment before you obtain your funding, but without taking that step, you will have a very hard time procuring that financing. There is no way for a lender to have confidence in a project they cannot visualize.

#5 – Be prepared to make a case for the appearance and versatility of the structure.

Lenders are concerned not only with the structural elements of a building, but also the cladding for its exterior. They may not like the thought of a metal building on a residential street—but if you can explain to them that you will be finishing it so that it blends in with others around it, that may help you get financing.

They also may worry about what will happen to the structure if there is a foreclosure. Designs which are versatile enough to repurpose (i.e. a workshop which could also work as a residence) are more likely to get financed. So whether you are after workshop garage financing, farmhouse financing, or anything else, if you can present your project as a multifunctional one, that will give you an edge with your application.

#6 – High credit is important, as always.

Your credit score is essential when you are applying for a regular home loan, and it is just as vital when you are applying for metal building financing. If your score is not as high as it could be, it may be worth your while to spend a little extra time bolstering it before you apply for financing. While you are doing that, you can focus on saving more money to put toward the construction of your metal structure.

What is the Basic Process for Financing a Metal Building Project?

You now know some of your options for securing loans for metal buildings. You also have some idea what lenders are interested in seeing when you apply. But what is the actual metal building financing process like? What are the steps you should take from start to finish?

1. Figure out what type of loan you need.

Do you need a loan just for construction, or do you need one to purchase a vacant lot for the building as well? While you used to have to get these loans separately, you will find that there are now combined loans available.

Once you have that figured out, you will need to decide whether to go with a one-time close construction loan, a note modification construction loan, or a two-time close construction loan.

With a one-time close construction loan, or “all in one” loan, you sign only once, and you lock in a single interest rate which applies to both the construction and permanent parts of the loan. The financing functions as a construction loan when you are building, and is later converted into a permanent loan.

With a note modification construction loan, you pay a different interest rate for each part of your loan (construction and permanent). You can lock in the permanent loan rate or not—it is your choice.

Finally, with a two-time close construction loan, you essentially have two different loans, and you close twice, as the name implies. The interest rates are different for each.

2. Find contractors to work with who are fully licensed.

Next, you will want to start thinking about which company you want to work with on construction (unless you will be building yourself). Try and stick with licensed contractors, because lenders will be more willing to finance a project if they can trust the competency of the builders.

3. Decide on a source for funding.

As discussed already, you have a lot of options here. Shop around and see what kind of offers you can find. In some cases, you may even luck out and find a lender who has an established relationship with the contractor, having already financed past projects that the contractor worked on. This can really add to the lender’s confidence.

4. Get your paperwork and blueprints ready.

Get all of your paperwork ready, including as much documentation as possible as pertains to the building itself. This not only shows that you are serious about the project and well-prepared to take it on, but also helps demonstrate that the structure you want to build is viable.

While you are doing all this, you can work on your credit rating and on gathering funds. As with other mortgages, a steel building loan will necessitate a down payment. The higher the down payment you can manage, the less money you are likely to spend on interest over time. This can also enhance your odds of approval.

While you are at it, start looking into your insurance options. Many insurance providers offer special discounts which are applicable to metal buildings (since they are more durable than traditional structures, resisting harsh weather and fire and requiring little maintenance), so see if there are savings you might qualify for.

5. Apply for your loan.

Finally, you are ready to apply for a loan. The bank, credit union, mortgage broker, or other company you choose to apply through will be able to walk you through the rest of the process step-by-step.

Once you have received a loan offer that you are happy with, you will be able to sign on it. After closing, you will have the financing you need to construct the metal building of your dreams.

Conclusion: Financing a Metal Building Can Be a Challenge, But If You are Well-Prepared, You Can Get the Loan You Need

You now know everything you need to get started with financing a metal building. Come up with a plan for your project, figure out the type of loan which will best fit your needs, get your blueprints in order, and hunt for the lowest rates and most favorable terms.

Whatever path you decide to take, if you shop around and take the time to track down the best financing opportunity, you should be able to construct your steel building without breaking the bank.