When it comes to commercial loans, the closing process is usually the most arduous time. Deals that have been in the works for months can break down if the process does not go smoothly; it can also be quite discouraging for the new commercial borrower with all of the added fees that can creep into the process. Closing a commercial loan quickly gets rid of all of these problems, and who wouldn’t like to begin doing real business earlier?
Here are a few tips on how you can close your commercial loan more quickly.
First, make sure that you have all the documents prepared that will allow the loan to close smoothly. You will need to profit and loss statements from the two immediately previous tax years. You will also need a current year-to-date profit and loss statement as well as a current rent roll.
Make sure that you separate the recurring expenses from the nonrecurring expenses on the profit loss statements. NOI analysis should not include any expenses that are not recurring.
You should also have plenty of exterior and interior photos of the property available. This will help a great deal if you find a loan today that is not local. Any lender will want to assess the quality of the real estate before moving forward in the process. If you can get together a website for the property, it will serve to raise the view of the property for the underwriter as well.
Prepare the Property
Make sure that you have any repairs done before any inspections. This goes double for any safety related or health issues that the property may have. These issues may include mold, fuse boxes that have outlived their usefulness, railings that are loose or any trip hazards. These hazards will need to be repaired before closing no matter what; however, if you do them before the inspections, you will save yourself a great deal of money and time.
If you have filed any tax extensions, have the paperwork for the extension ready along with the other paperwork that was mentioned above. You should also be sure that your extension is still valid. You will also need your year-end financial statements. Make sure that all of your tax returns are signed.
Along with a personal financial statement, create a schedule of all of the real estate that you currently own. Your lender will need an assessment of your liquidity as well as your net worth. If any of your properties are operating at a loss, do not hide this from the lender. They will certainly research you and find out. Contingent liabilities do not necessarily mean that the process will move more slowly. Compare the differences with Personal Loan.
Get together your most recent bank statements.
Any statements of refinancing should also be included in your paperwork. Have your survey, insurance policy, payoff statement and title policy ready for your lender to peruse.
If there are tenants in any of your other commercial properties, make sure that all of their releases are valid. Their lease term should also match what you have written on your rent roles.
Reporting to the Other Party
Have your personal credit report ready. If you can clear up any mistakes before the closing of the property, do so. If you cannot, include a letter that explains any negative items. Again, it is never posited to the process to try to hide any negative items.
Make sure that your corporate entity has an active status and that your business and occupational licenses are all up to date.
Do not unnecessarily inflate the value of a property to a lender. They will do their own appraisal before everything is finished, and if their value differs greatly from the one that you have reported, it can slow down the closing process tremendously.
There are very few circumstances in which you should order your own appraisal for a commercial lending process. This leads to a huge conflict of interest for a borrower and can be interpreted in a negative way.