What documents do you need to apply for a commercial real estate loan?

Here's a quick summary of what good loan package will include. Plenty of additional details under each of these sections but this should provide a lot of traction with potential lenders: 1. Executive Summary 2. Financing Request 3. Investment Highlights 4. Risks & Mitigants 5. Property Overview 6. Location Overview 7. Market Overview 8. Financials 9. Sponsor Overview You should also include all Excel files and supporting documentation (rent rolls, operating statements, etc.) so they can do their own analysis. The better prepared package will get high level responses from potential lenders.

Personal and business financial statements serve as vital tools for understanding and managing financial health. Personal financial statements, comprising primarily of a balance sheet and an income statement, offer individuals insight into their net worth, income, expenses, and financial progress over time. Similarly, business financial statements, including the balance sheet, income statement, and cash flow statement, provide a comprehensive overview of a company's financial position, profitability, and cash flows. Both types are essential for making informed decisions, securing loans, and attracting investors by demonstrating financial stability and growth potential.

Below are most commonly required documents by lenders - 1. Historical and Proforma Property Information 2. Property Title and Survey 3. Property Due Diligence 4. Insurance Policy Reviews 5. Property Management 6. Borrower Structure 7. Key Principal / Loan Guarantors

Although we required many minutes of documents to process a loan - the priority documents are the Appraisal report the Rent Roll and the in-place T12 which our LTV or LTC would be decided. Property appraisal report: This evaluates the market value and condition of the property you want to purchase or improve. Rent roll and operating statements: These demonstrate the income and expenses of the property, as well as the occupancy and lease terms of the tenants (for income-generating properties).

A well prepared and well received CRE financing request will include the following property and Sponsor financial information: Property Financials - Historical income statements (T12 & T24) - In-place and stabilized pro forma - Stabilized valuation - Annual cash flow projections - Assumptions Sponsor Financials - Personal Financial Statement for each Principal - Resume reflecting background, past projects, track record, etc. - Prior debt and/or equity partners if applicable Prepare to provide the following: - 3 months asset statements demonstrating liquidity - Most recent 2 years individual & business tax returns - Complete schedule of REO

For the initial underwriting of existing properties: - T12 - RR - Commercial leases - A/R report - A/P report for refinances - Purchase and sale agreement for acquisition - Refinance: Original purchase price + closing costs + capex since acquisition, in-place debt and liens info Once under application, a lender will go into much more detail and will order an appraisal, property condition assessment, environmental report. They will also require a clean survey, title commitment, insurance coverage that meets the lender's requirements. Ground-up developments will require additonal information such as a detailed development budget, development pro forma all the way to stabiliztion, market study, etc.

See https://FINANCEoptions.biz and click Submittal Requirements in the Table of Contents. It also contains types of loans, costs and other important information.

When providing an overview of the property or project, include the following information: Physical Characteristics - Year built - Size - Condition - Repairs / deferred maintenance - Current and historical occupancy - Rent roll - Parking - Photos - Site plans For construction loan requests, include the status of drawings, permits, etc. For bridge loans involving substantial renovation or repairs, include a budget overview and summary scope of work. Location Overview Outline key demand drivers: proximity to public transportation, major employers, major attractions, neighborhood amenities, etc. Local Market Overview Population growth, employment stats, household income, traffic (foot or vehicle) stats, etc.

Beyond the financial statements, when loaning money on property, the property information is vital. Gathering this information can be pulled from the Canadian MLS listing, when it is listed for sale. Or, you may have to gather this information by asking questions and doing some of your own research. Of course, lots of information will also be obtained from appraisals you will have to order: value evaluation and an environmental evaluation.

The Financing Request and Executive Summary components of your package provide a structural framework for the supporting information and documentation. Executive Summary Provide a brief overview of the transaction, property, location, plan, sponsorship, timing, etc. Financing Request - Loan type (bridge loan, term loan, permanent financing, construction, etc.) - Loan amount requested - Loan term - Loan to Cost or Loan to Value requested - Cap rate - Debt service coverage ratio - Sources and Uses Risks & Mitigants Highlight any challenges or mitigating factors concerning the property, transaction, sponsor, or loan parameter requested.

Demonstrating a robust cash flow forecast is vital to ensure the project's ability to cover operational costs and repay loans. Lenders seek a clear and sustainable path to repayment, making cash flow projections a critical aspect of project proposals.

Include any source materials such as spreadsheets containing rent roll, financial, or other information that may aid your lender in evaluating your request or saving valuable time in the process. Excel is always preferred for rent rolls, capex schedules, and schedules of REO, so the data may be accessed with ease for modeling and underwriting.

Here is the thing about additional documents: always be flexible. Your broker will ask you for a common list of documents, and they will also say something to the effect of, the lender may ask for 'blank'. The lender is using their money to fund your business dreams, and it is all well within their rights to ask and expect you to hand them what they ask for. If they are asking you to provide business financial statements going back three years instead of the normal two, just give it to them. It's their money; they are deciding whether or not to risk it on you. When you think of it that way, all of a sudden, having a lender ask for a few extra documents seems well within reason.

On large commercial loans with agencies, like Fannie Mae and Freddie Mac, it is good if at least one of the borrowers has prior history with them. The combined net worth and liquidity of all the loan signers should meet lender minimum criteria such as 10% of the amount being borrowed.

Overvaluing a project or business can raise concerns among capital sources. Unrealistic valuations may lead to rejection. I can not overstate the importance of grounded and justifiable valuation methods.