Commercial Real Estate Finance Page 3
make loans with higher levels of risk in return for a higher return on the investment.
However, there are now many self-described hard money capital sources whose internal funding structure is quite similar to that of portfolio capital sources, so the latter distinction is probably more crucial. Most bridge capital sources fall into this latter category.
Small Business Administration (SBA):
These commercial loans are written by private companies, such as banks and specialty finance companies, but which are largely guaranteed by the Small Business Administration.
SBA loan guarantees were created by Congress to encourage the formation and growth of small businesses.
United States Department of Agriculture (USDA):
The Department of Agriculture’s Business and Industry loan program is very similar to the SBA loan program, where a conventional capital source makes the loan but the USDA guarantees most of it. USDA Business and Industry loans were created to help create jobs in rural areas.
Federal Housing Administration (FHA) 223 (f):
FHA 223(f) apartment loans are available for the acquisition or refinancing of 5+ unit multifamily properties and are a great financing option for borrowers looking for maximum leverage and longer fixed rates and terms.
There are no income or rent restrictions under Section 223(f) unless otherwise required by a project based HAP contract or other regulatory agreement. FHA 223(f) insured mortgages are non-recourse with no market - economic or population - restrictions.
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Supporting Document List
All of the due diligence you’ve conducted up to this point, hopefully has prepared you for the supporting document phase.
This is the most important part of the commercial real estate loan submission process.
Whenever you seek to borrow money for a real estate investment, you will have to understand the process and the documentation.
Before you even consider presenting an offer to purchase a commercial real estate investment, you will need to package your loan proposal ahead of time.
Then be prepared to support the facts to a capital source’s underwriter during their due diligence investigation. If you don’t provide everything that’s requested or take too long, your financing request will never fund.
Winston Rowe & Associates, a due diligence and advisory firm, if you need assistance, check us out at winstonrowe.com
Since there is really no typical transaction, the following is an example supporting document list and in the following chapter a typical list of questions that you’ll see on a loan application.
Financial Supporting Documents:
The last three (3) years corporate tax returns
The last three (3) years personal tax returns
Name and address of corporate bank
Business profit & loss statement
Most recent copy of business bank statement
Personal financial statement for all guarantors
Detailed use of proceeds
Property Supporting Documents:
Schedule of tenants leases
Copies of tenant leases
Schedule of units with square foot per unit
Schedule of improvements to be made with cost breakdown to subject property
Exterior photos of subject property photos of parking lot, street view
Interior photos of subject property
Appraisal
List of all litigation past and present
Guarantor Supporting Documents:
4506 (t) IRS form
Tri merge credit report
Government issued photo ID front and back copy
Articles of Incorporation
Professional resume
Personal financial statement
Personal bank account information
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Questions In A Loan Application
Most capital sources that finance commercial real estate throughout the United States utilize similar questions within their loan applications and summaries for the initial review of your proposed financing request.
The world of commercial real estate finance is not standardized; hence just about every capital souse uses their version of an application form and has their own intake process.
The areas most focused on in a potential capital source’s application form are property type, value, loan amount, loan to value (LTV), debt service ratio (DCR), transaction type (purchase or refinance) and business and personal financials for the property and owner.
Contact us if you need custom submission forms developed or a little help with your commercial loan application at winstonrowe.com
The following are example questions that you may encounter on a commercial loan application form.
Property& Valuation Section:
Building Name
Borrower’s Name
Building Type
Number of Units
Age of Building(s)
Property Address
City, State Zip
Building Website
Building Phone Number
Building Email Address
Is the Building Listed for Sale
Link for the Listing
Cash Down Payment
Total Financing (Loan) Amount Required
Cash Out Amount
Detailed use of proceeds required
Present Value of the Building
Date of Last Appraisal
Date of Last Sale
Transaction Type Section:
REO / Foreclosure
Short Sale
Land Contract