As a commercial mortgage broker I converse with aspiring commercial developers on a daily basis. Often times I am surprised by their lack of specific knowledge as to what it takes for a commercial construction project to obtain financing. This article will discuss what should be included in a good loan submission package for a commercial development project.
The last thing you want to happen to your financing proposal is have it land on the bottom of the pile on a bank loan officer's desk. Every loan package for a commercial construction project should contain a few essential elements or it will be ignored, or even denied.
Commercial Construction Loan
The first element of a good commercial construction loan package is the executive summary. The executive summary describes the project in paragraph form and it describes the project, location and general strengths of the deal.
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Citation Details
Title: First Housing development tops .4 million for construction.(Commercial)
Author: Michael Sorohan
Publication:Mortgage Banking (Magazine/Journal)
Date: November 1, 2009
Publisher: Mortgage Bankers Association of America
Volume: 70 Issue: 2 Page: 79(1)
Distributed by Gale, a part of Cengage Learning
The second essential ingredient to a loan package is the detailed resumes of the project principles and the general contractor if he is not already a principle. The resume should include a detailed list of actual projects completed. Specific experience is a key component of the loan package.
Pro-forma projections on the project and the net income expected are required. A detailed cost breakdown and analysis should also be included. Information on the property-demographics, absorption studies, marketing and management plans, etc should all be included. The more detailed the information the better.
A personal financial statement for all partners, the general contractor and all business partners for the last three years is required.
Information should be provided on all pre-sales along with proof of the pre-sales. Banks and lenders like to see at least 50% of the project pre-sold.
The three most important ingredients in a commercial development loans are money, experience, and pre-sales. You need to have 2 of the 3 to have a shot. You need all 3 to be assured.
Most of these deals fall down in the financials and the pre-sales. And upon digging, often lack of experience shows up as well. The minimum you need to get a quote is the executive summary and the pro-forma. The rest is needed to submit.
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