Construction-only loans provide financing for the build but generally have a short term (typically one year). After that, you’ll need to pay the loan in full or refinance. These can be risky for borrowers, who may be stuck with a large payment due at the end. OUCU offers construction-to-permanent loans that feature interest-only payments during the construction phase, then seamlessly transfer to paying off principal and interest when construction is complete.

Down payments for commercial construction loans vary from lender to lender. Many borrowers choose to make a down payment between 20-25%. For new construction projects (also called ground-up construction), you’ll need to have a 25% down payment (or equity), based on the total cost of the project.

Construction loans are designed to finance the build process. If you want to finance land for commercial purposes rather than build a commercial structure, it may be better to invest in a commercial real estate loan.