Knowing the commercial loan processing system ins and outs can work wonders to reduce stress while you wait for approval. Some lenders prequalify potential borrowers to figure out how much they can pay. This will let you and your lender see which loan program would be most fitting for your situation. The lender will collect information such as your income and existing debts. To begin the loan process, you must submit a loan application.
Once your application is taken, a loan officer will look over your credit reports, the amount of available collateral, and your income. Your loan officer will figure out if any additional documentation is required, such as personal financial statements. If you are buying real estate, you may also need to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries. If you are going through a broker, he or she will put together your loan request and submit it to several lenders for approval.
After your commercial loan package is presented to the decision makers - either a loan committee or underwriter - the processor will give you a letter of intent or term sheet. A letter of intent or term sheet is a formal document intended to ensure all parties involved (the lender and your company)
are on the same page. The letter of intent may include the names of involved parties, amount of financing, type of security (collateral), and other key terms. Decisions are usually made in one to five days. During the underwriting process, you may need to furnish additional documentation.
If you are using a broker, they will determine the best terms, fees, and conditions from various lenders. The next step is choosing the most attractive offer and signing and returning the final letter of intent along with a check, if required, for a deposit, and to pay for third-party reports, such as appraisals.
After all third party reports are completed and underwriting conditions are fulfilled, the final loan package is resubmitted to the loan committee for approval. At this time the lender will issue a full loan commitment. If your loan is approved, your closing agent, who may be an attorney, a title company, or escrow company representative, will receive closing documents. Your closing agent will file deed transfers and mortgages, order title insurance, coordinate the exchange of funds, and plan for you to sign the loan documents. Closing can take place within days of approval or underwriting. At the closing, the lender funds the loan with a cashier's check, draft, or electronic wire transfer.