Final Financing for Eco Express
We’ve discussed before getting preapproval for your financing of the project. The financing is typically provided in two parts – the construction loan and the permanent loan. The construction loan is meant to provide financing through the construction phase and the initial operating phase until the certificate of occupancy can be obtained and all requirements completed for permanent financing. Banks will often be able give you a fairly accurate estimate for fixed rates on construction loans, however permanent financing rates are more difficult to obtain far in advance of project completion. Permanent financing often will have a period of fixed rates, followed by floating rates, with loan lengths varying, up to 15 or 20 years.
When seeking financing, it’s best to approach several banks to reduce risk and have the broadest terms available to you. Often banks will give you positive indications that they like the project, but then when it comes time for final approval, politely decline to offer financing. Nothing is more frustrating to hear yes, yes, yes, NO!
You may also have the greatest success in seeking financing from banks that you already have an existing relationship with and have branches in the area the wash is to be built. Banks tend to be risk-averse. They like to know personally to whom they are lending, and like to have a good first-hand knowledge of the area the business is going to be located in.
In the case of Eco Express, we leveraged the relationship one of the partners had with his bank. After providing our business plan, financial proforma, and satisfying their underwriting requirements, they enthusiastically agreed to fund our project. Throughout the course of the project we communicated with them and kept them in the loop as far as development and later construction progress. This helped to build the relationship, and when the time to finalize permanent financing came around, they gave us a variety of options to select from as far as rates and terms.