Loans For Love

OK, that is admittedly an odd title for a commercial lending related post, but I had to tie this post to Valentine’s Day somehow, right? Yes, gentlemen… Valentine’s Day is quickly approaching and if you haven’t planned for it, you’ll be paying a premium for those roses, chocolates, and good luck getting a good seat at Mastro’s Steak House!

And that allows me to segué into my “lending” topic: Planning, specifically as it pertains submitting a commercial loan request. One of the most difficult aspects of being on the lending side is getting “piecemealed” on the information that we need to make a realistic decision on interest in the transaction and pricing. This represents a lack of “planning” from my perspective.

This is especially apparent in “fast funding” situations. There’s an old saying: “A lack of planning on your part does NOT constitute and emergency on my part.” Pulling documents one at a time out of a broker or borrower does not bode well for a quick close. So what does it mean to “plan” for a submission?

I would suggest at the very least that you have the following prepared and ready to sent to a lender:

  • A well prepared and complete Executive Summary describing the transaction clearly, no more than 2 pages of text, with pictures.
  • The guarantor(s) Personal Financial Statement, Schedule of Real Estate, and Credit Report.
  • If a purchase, the Purchase and Sale Agreement and Offering Memorandum.
  • If a refinance, SOME validation of value (either comps, a recent BPO, or an appraisal) and a breakdown of equity injected into the project.
  • A Use of Funds Statement.

All of that should pretty much describe the transaction in enough detail for a lender to provide a realist and quick response on pricing and closing time. Yes, it means more work on your part… at first. However, you’ll find that when shopping for good loan alternatives, this approach will save you a HUGE amount of time an headache.

Now gents… get out there and get those flowers, chocolates, dinner reservations, teddy bears, and anything else to let your special someone know just how special she is!

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender who has been in the commercial real estate lending business since 1993.

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