Metal Building Financing

A Guide to Loan and Financing Options

Financing a metal building

Introduction

Are you thinking about how to finance your metal building? There are a few things you should know. This guide will cover the basics of financing a metal building, including specific options. We'll also discuss the pros and cons of each so you can make an informed decision.

Where can you get loans for metal buildings? How long is a finance term possible? How do you go about this?

Financing a metal building can be tricky. Many lenders don’t understand these buildings and aren’t aware of the many benefits of building with steel. They may have only seen a few such projects and have limited experience to work from. And banks being banks, they don’t want to risk financing something they don’t fully understand.

Before you approach potential lenders, you’ll need to research and be prepared.

  • Research and build a list of lenders with metal building experience
    The more experience, the better, and preferably with the specific kind of metal building you’ll be putting up.
    Avoid lenders with separate construction and mortgage departments. You don’t want to deal with two sets of requirements within the same bank! (See further down the page for a couple of recommendations).
  • Thoroughly research and document ALL costs
    Be prepared to know how much investment you want to make or can make. The more reliable and detailed the information you give the potential lender, the more risk you are removing – and the more likely you are to get a positive response. (If you don’t already have quotes for your building kit, we can connect you with up to four suppliers. Click here to get competing quotes.
  • Have engineering drawings and floor plans ready
    Again, the more information you provide, the more you are lessening the bank’s risk and the more likely you are to get a positive response.

Steel Building Financing Options

Home improvement loans
The best option for smaller buildings and for short-term financing.

Construction loans and mortgages
Best suited to larger-scale projects needing longer-term financing options, e.g. homes and commercial buildings.

Agricultural and rural property financing
Most suitable for farms and rural properties over five acres.

Types of Loans for Metal Buildings

Home Improvement Loans

Most suitable for smaller buildings such as garages, workshops, and outbuildings.

Loan amount: $1,000-$50,000
Term: 2-12 years
APR: 4%-20%
Min. credit score: 660-850

A home improvement loan is an unsecured personal loan. It’s not a mortgage or reverse mortgage, and you don’t have to provide collateral.

It’s wise to research costs very thoroughly, including any design alternates and variations in the project. Then add maybe 20% to provide a buffer for unexpected issues, rising material costs, and inaccuracies in the original estimates.

Pros & cons of home improvement loans

Pros

  • A steady monthly payment could be modest – as small as $1,000.
  • Fixed interest rates.
  • Doesn’t put your home at risk.
  • Easy to apply for (these days, you can often apply by phone or online).
  • Quick to receive the loan.

Cons

  • Requires taking on debt for perhaps a considerable period of time.
  • The loan amount is set in advance, so there is little flexibility for unexpected cost overages.
  • Higher interest rates than a secured loan.

HELOCs (Home Equity Line of Credit)

HELOC Pros

  • Can provide a large line of credit.
  • Flexible access to funds.
  • Allows use for any reason.
  • Competitive rates.
  • Long repayment times keep payments low.

HELOC Cons

  • Longer repayment time could result in a higher total payment amount.
  • Tied to the equity in your home (your house becomes collateral for the loan, and defaulting on payments could put your home at risk).
  • Interest rates on HELOCs are variable. Some banks have safety guards that ensure the rate won’t rise more than 2% yearly, but even that could add a lot to your payments.
  • The downside of “flexibility” is that the borrower can get into trouble if an emergency comes along or if they are tempted to buy non-essentials with HELOC funds.

Construction Loans and Mortgages

Most suitable for: residential buildings, retail, and commercial building loans.

Loan amount: $5,000-$50,000
Term: 2-5 years
APR: 5%-30%
Min. credit score: 560-680

A construction loan is a short-term high-interest loan specifically for building a residence. It might be a year in duration and cover the land, materials, and construction cost. You’ll need detailed budgets and plans prior to submitting your application. The loan would usually have a variable rate, which would be higher than a mortgage since your home is not acting as collateral.

Construction loans are more complex than a standard mortgage, so it is best to find a lender with an extensive background in this type of loan.

One major factor to consider (among the many) is the availability of materials. When this page was originally written, we went through a few years of fluctuations in steel supply and periodic pricing increases. This needs to be taken into account when borrowing. E.g., if you take 2 months to do the paperwork and you haven't locked in the price of your building, you could be left short on the loan amount.

A construction-only loan covers the completion of the home and will require a second (mortgage) loan. A construction-to-permanent loan (see below) includes the mortgage phase.

What is a construction-to-permanent loan?
(Also called single-close loan or one-time close OTC.)

This type of loan is a single loan that covers the entire process -- purchasing land, building a home, and serving as a mortgage. Otherwise, separate loans would be required.

Pros

  • Works like a line of credit, allowing you to draw money when needed.
  • During the construction phase, you are charged interest only on the money drawn for construction, meaning lower payments than some other types of loans.
  • You don’t have to go through the entire process for two different loans.

Cons

  • Can have a higher fixed interest rate.
  • Might require a larger down payment.
  • Could require more documentation compared to other types of loans.

Some home improvement loan and HELOC providers

Banks That Finance Metal Buildings

Construction-to-permanent loan providers for your metal building

New Century Bank

To the best of our knowledge (July 2022), New Century Bank is the only lender that specializes in construction and permanent mortgages for metal buildings.

Most lenders will only provide financing for conventional ‘stick-built’ buildings. The Federal Housing Administration, a Federal Government body whose purpose is to help homeowners with lower credit scores, actually states:

The following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only), or Wind-Powered (only) Homes.

What does New Century Bank offer?

A lender that specializes in metal buildings, including garages, workshops, barns, homes, and commercial and retail buildings.

Features of their loans include the following:

  • Conventional lending rates.
  • Fixed-rate financing with 30-year amortizations.
  • Low down payment. Can be as low as 10% plus closing costs.
  • The equity in the land you currently own can be used as a down payment.
  • The security of a fixed-rate mortgage gives peace of mind.
  • You can be your own general contractor or do some of the work.
  • Short-term loans to buy land and build include the debt in the construction mortgage.
  • They also provide second mortgages and home equity lines of credit up to 90% of the appraised value.
  • The loan can cover all expenses for the construction process.
  • Short-term loan options are available.
  • Commercial and lease finance options are also available.

Agricultural and Rural Property Financing

Farm credit is available through various lending sources.

Unlike most banks and credit unions, institutions that offer to finance agricultural buildings are well-acquainted with metal buildings since, of course, so many agricultural buildings are metal. This should make the process of applying for and getting a loan smoother and easier process. Many fixed and variable-rate loans are available.

A great deal of assistance is available between the various levels of federal and state programs. For example, the USDA’s “Farm Service Agency” offers loans and loan guarantees for farmers who aren’t eligible for commercial farm credit to help bridge the gap to commercial credit.

We highly recommend you speak with a professional financial advisor for agricultural buildings to explore your options.

Possible Lenders for Agricultural and Rural Property Financing:

 

For More on the Build Process

See our overview of a metal building project including planning, designing, erecting and more ...

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