The commercial loan application general starts off with a general discussion of what the borrower is trying to accomplish and what potential loan options the commercial lender or broker can provide. Rates are often quoted as well at this point.
Assuming there is a decent match between the two sides the lender or broker will want to get documentation to further formalize the commercial loan application. Typically the lender will want to see three years worth of tax returns, both personal and business, year to date financials such as a profit and loss statement and balance sheet.
Also lenders will need to get a better idea of what the borrower’s credit score is and will often ask for a borrowers authorization to pull credit. A business debt summary is empréstimo sim often required as well if the business (on owner occupied transactions) has a substantial amount of business debt. The debt summary will include a list of the terms, amortization, rates etc on this various debt.
Often the lender will want the borrower to fill out an actual commercial loan application to make sure they have all of the details correct. Its normally 5- 10 pages long and is a major inconvenience for all involved – but necessary. Once all of the documentation is put together underwriting is ready to sit down and review the total commercial loan application.
It is at this point that the bank will make its initial decision on whether to fund or pass. If they decide to fund to the next step a Letter of Intent aka Term Sheet will be issued, which highlights all of the major terms such as proposed rate, amortization, prepayment penalties, etc.
It is also important to point out that it is at this junction the funding bank will ask for a good faith deposit assuming the borrower is agreeable with the deal. Borrowers should be careful if brokers or lesser known banks ask for large deposits if they haven’t yet reviewed the file. That is a big red flag.
What’s a normal good faith deposit? The bank will normally want to have in hand enough to cover the outside third party reports such as the appraisal and environmental. The total is normally around $5,000 for general use properties with loan amounts less than $3,000,000. These deposits can be much higher on special use properties, for example hotels where the appraisal normally runs $10,000 or more.
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