How to Get Funding for a Construction Project

 

Getting funding for a construction project can be tough or smooth depending on various factors such as your financial standing, creditworthiness, quality of your presentation and proposal. Every lender (or investor) wants to know what they are getting from a project or business plan. They are bound to ask you tough questions, test your proposals and ask for a lot of documents. If you want to increase your chances of getting building finance, you have to prepare the required documents, and you must know the options available for you in your region:

Prepare a Cost Estimate

The first step in securing construction finance is preparing a cost estimate for your proposed project, and you can get this estimate from a consulting quantity surveyor or certified estimator. If you already have the sketch plans or architectural drawings, the quantity surveyor will need them to prepare an estimate. You will need to pay the quantity surveyor for this estimate, since it’s a professional document with quantitative and qualitative input. Do not assume that you can get an estimate anywhere e.g. from a building contractor, because what the contractor gives you is not an estimate, but just a quote.

The quantity surveyor can prepare three types of estimates, the Superficial Floor Area Estimate, Elemental Estimate or Provisional Bills of Quantities.

Bank Rating

When you have obtained the estimate, the next step is approaching your bank to get a bank rating or letter of financial standing. If you have a good bank rating or credit score, the sponsors will view you in a positive light, but if you have negative rating, it will reduce your chances of landing a contract.

In applying for funding, you have to decide whether you will apply as an individual or as a registered company. If you are applying as a company, you might be required to submit proof of business registration and tax certificates.

Items that may be required by investors are outlined below:

  • Cost estimate
  • Proposal ,Presentation
  • Business/Financial plan with cashflow and cost projections
  • Bank rating/score
  • Letter of financial standing from your bank
  • Guarantees from building material suppliers and other creditors
  • Business registration
  • Tax certificates
  • Proof of vacant land or site on which the construction will take place
  • Building license or building plan approval

Prepare a Financial/Business Plan

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