Commercial Building Construction Loan Philippines: Which Banks Offer It?

Commercial Building Construction Loans in the Philippines: A Complete Guide

Building a commercial property in the Philippines — whether it's a shophouse, office building, warehouse, or mixed-use development — requires significant capital. For most developers and business owners, a commercial building construction loan is the financing vehicle that makes it possible.

But commercial construction financing works very differently from a standard home loan. The products are more complex, the requirements are stricter, and fewer banks offer them as a retail product. This guide breaks down everything you need to know: which banks offer commercial construction loans, what to expect in terms of rates and terms, and what your alternatives might be.

What Is a Commercial Building Construction Loan?

A commercial building construction loan is a short-to-medium-term credit facility specifically designed to fund the construction of income-producing or business-use properties. Unlike a regular mortgage — where you borrow a lump sum against an existing property — construction loans disburse funds in tranches as the project progresses.

Typical uses include:

• Constructing a commercial building on a lot you already own
• Building a mixed-use property (ground floor commercial, upper floors residential)
• Developing a warehouse or industrial facility
• Building office space or a boutique hotel

After construction is complete, the loan is often converted into a term loan or the borrower refinances into a permanent commercial mortgage. The construction phase typically lasts 12 to 36 months.

How Construction Loan Drawdowns Work

One of the most important features of construction loans is the progressive drawdown structure. Instead of receiving the full loan amount on day one, the bank releases funds in stages tied to construction milestones:

• Stage 1: Foundation and ground-floor slab completion — typically 20–25% of loan released
• Stage 2: Structural works up to roofing level — another 25–30%
• Stage 3: Internal finishing, plumbing, and electrical rough-in — another 25–30%
• Stage 4: Final completion and certificate of occupancy — remaining balance

During the construction period, most banks require interest-only payments on the amount drawn down. Full principal-and-interest repayments begin once the structure is complete and the loan converts to a permanent facility. This helps manage cash flow during the build phase.

Which Philippine Banks Offer Commercial Construction Loans?

Commercial construction finance is offered primarily by the larger universal and commercial banks. Here is an overview of the major players:

BDO Unibank

BDO offers commercial real estate loans that can be structured to cover construction of income-producing properties. BDO's corporate banking and commercial banking divisions handle these transactions, and terms are typically negotiated on a case-by-case basis. Loan amounts can range from a few million pesos up to hundreds of millions for large projects. BDO generally requires the borrower to own the land and demonstrate sufficient equity — typically at least 30–40% of total project cost.

BPI (Bank of the Philippine Islands)

BPI's corporate and SME banking arms provide project finance and commercial property loans. BPI is known for competitive pricing on commercial real estate and has a dedicated team for commercial and industrial property transactions. Borrowers approaching BPI for construction finance will typically need audited financial statements covering the last 2–3 years, a detailed project feasibility study, and a licensed contractor agreement.

Metrobank

Metrobank offers commercial real estate loans and has appetite for construction financing on office, retail, and industrial properties. Like BDO and BPI, terms are largely relationship-driven and depend heavily on the borrower's financial profile, the project's projected income, and collateral coverage.

Security Bank

Security Bank has been active in SME and commercial real estate lending and offers construction loan products for qualified borrowers. They have been noted for more flexible underwriting on mid-market commercial projects compared to the largest banks.

PNB (Philippine National Bank)

PNB offers commercial real estate and project finance loans. As a government-affiliated bank, PNB has historically been active in funding commercial and industrial developments, particularly in the provinces.

RCBC and UnionBank

Both banks have commercial banking divisions that handle real estate project finance. RCBC in particular has been active in commercial mortgage lending for income-producing properties.

Landbank of the Philippines

Landbank offers commercial and agri-industrial project financing, and can be a strong option for commercial projects outside Metro Manila. Their mandate includes supporting economic development in the regions, which can work in your favor if your project is located outside the major urban centers.

A Note on Pag-IBIG (HDMF)

Pag-IBIG's home loan program is designed exclusively for residential properties. It does not cover commercial building construction. If you are building a purely commercial structure, Pag-IBIG is not an option.

Typical Rates, Terms, and Requirements

Commercial construction loans are priced higher than residential home loans because they carry more risk. Here is a general guide to what you can expect in the Philippine market:

• Interest rates: Typically 7% to 12% per annum during construction, depending on the bank, loan size, and borrower profile. Rates are usually floating, benchmarked against the BSP policy rate or the bank's own base lending rate.
• Loan-to-Value (LTV): Most banks will lend up to 60–70% of the appraised project cost (land plus construction). You must fund the remaining 30–40% from equity.
• Loan tenure: Construction phase of 12–36 months, followed by a term loan of up to 10–15 years for repayment.
• Minimum loan amount: Most banks set minimums of 5,000,000 to 10,000,000 for commercial construction facilities.
• Collateral: The land and the structure under construction serve as primary collateral. Additional collateral or guarantees may be required.

Key Documents You'll Need

• Title to the land (clean title, free from encumbrances)
• Building plans approved by the local government unit
• Bill of materials and construction cost estimates from a licensed contractor
• Building permit
• Business registration documents (for corporate borrowers)
• Audited financial statements for the past 2–3 years
• Income tax returns
• Project feasibility study (especially for large or income-generating properties)

Commercial vs. Residential Construction Loans: Key Differences

If you are more familiar with residential construction loans (which some banks like BPI and BDO offer for owner-occupied homes), it is important to understand how commercial loans differ:

• Higher equity requirements: Residential construction loans may allow LTVs of up to 80%. Commercial projects typically cap at 60–70%.
• More rigorous feasibility assessment: For commercial projects, the bank will assess the income-generating potential of the property — projected rental yields, occupancy assumptions, and market comparables.
• Longer processing time: Expect 4 to 8 weeks for approval, sometimes longer for large projects.
• Relationship banking: Large commercial construction facilities are rarely processed over the counter. You will likely be working with a dedicated relationship manager.

What If You Already Own a Commercial Property?

If construction is complete and you already have a commercial property with an existing loan, your priority may be refinancing to reduce your interest costs rather than securing new construction finance. Commercial property refinancing follows similar principles to residential refinancing — you can potentially switch to a lender offering a lower rate, extend your term to reduce monthly payments, or release equity from the property.

If you also have a residential property with a home loan, refinancing that loan is often the fastest and most cost-effective way to free up capital. Many Filipino business owners use their home as collateral for business expansion or simply want to reduce their monthly housing costs. You can use our home loan refinance calculator to estimate how much you could save by switching lenders on your residential mortgage.

How Nook Fits In: Residential Refinancing While You Build

Nook is the Philippines' first digital mortgage broker, specializing in residential home loan refinancing. While we do not directly arrange commercial construction loans, there are several ways Nook can support business owners and developers who are also carrying residential mortgages.

Many of our clients are business owners or property investors who:

• Want to reduce monthly cash outflows by refinancing their home loan to a lower rate
• Are paying 8–10% on a legacy home loan when rates as low as 5.99% p.a. are available today
• Want to consolidate or free up personal cash flow to support a commercial project

If you're paying an elevated rate on a residential property, refinancing through Nook could save you tens of thousands of pesos every year — cash that could be redirected toward your commercial development. Check the latest home loan interest rates in the Philippines to see how your current rate compares to what's available now.

Nook's service is 100% free to borrowers. We work with multiple banks — including BDO, BPI, Metrobank, Security Bank, RCBC, UnionBank, and others — to find you the best available rate on your residential loan.

Summary: Getting the Right Construction Financing

Commercial building construction loans in the Philippines are available through most major universal banks, but they require strong financial documentation, significant equity, and often an existing banking relationship. Here are the key takeaways:

• BDO, BPI, Metrobank, Security Bank, PNB, RCBC, Landbank, and UnionBank are the main providers
• Expect interest rates of 7–12% p.a. and equity requirements of 30–40%
• Loans are disbursed in tranches tied to construction milestones
• Pag-IBIG does not cover commercial construction
• Processing typically takes 4–8 weeks minimum
• If you have an existing residential home loan, refinancing it through Nook could free up meaningful cash flow to support your project