Helping You Navigate The Commercial Loan Closing Process From Start To Finish
Borrowers, lenders, and their counsel, rely on a loan closing checklist to keep track of documents that must be examined, prepared, consulted, and finalized to close a commercial mortgage loan. A borrower looking to get a commercial loan may view this complicated process as intimidating. The following are five clear steps to help you stay organized, prepared and on track to support a quicker and simpler commercial loan closing
Provide Lending Criteria
Step 1. Provide your lender with requested criteria to begin the underwriting process. This includes the property address, property type, square footage, rent roll (as applicable), and purchase price. Based on this information the lending team will discuss loan terms, which will be presented to the borrower for consideration.
Letter Of Intent (LOI)
Step 2. If parties agree, a letter of intent (LOI) is drafted. A LOI is a preliminary agreement that identifies and frames the loan terms agreed in principle between the parties. The LOI is preliminary because later, detailed definitive agreements will supersede this preliminary document. After the LOI is signed by both parties, a site visit is arranged, followed by a borrower meeting.
Seek Legal Counsel
Step 3. At this point the borrower engages legal counsel and pays their fee to draft the loan documents. This will be the only upfront fee that is charged. Opening escrow and title to manage all documents and record the loan is next, if not already completed. Escrow offers all parties financial protection, as funds are held by a neutral third party and may be withheld if requirements are not met by either party.
Organize Due Diligence Documents
Step 4. Organize all your documents that will be needed for due diligence. These include entity information, insurance policies, financial statements and guarantor information, and all property documentation, including:
- Leases
- P & L’s
- Environmental reports
- Permits
- Inspection Reports
Draft Documents for Review and Approval
Step 5. The lender drafts loan documents and shares these with the borrower for review and approval. The date of signing is set, signed by the borrower, and reviewed by the lender. Escrow receives the borrower’s funds followed by the lender’s funds. Finally, the title company sends the deed of trust (DOT) to the county to be recorded, and the loan is closed.
Conclusion
Streit Lending advises their clients to maintain open lines of communication throughout the process to manage any issues that may arise. Noah Streit, Managing Principal, emphasizes the importance of disclosure and transparency. “We would much rather have a problem be brought to the forefront immediately than discover it carrying out our due diligence. If a client does have something to work through, it is better that we know in advance, because we can present solutions that the client may not have thought of him or herself. We are experienced lenders in the field and have faced a similar scenario before. We view ourselves as our client’s partners and advisors and desire the best outcome for all involved.”
About Streit Lending
Streit Lending offers short-term construction and bridge loans in Southern California, from $500,000 to $10,000,000 at a loan-to-cost up to 70 percent, to build and rehabilitate commercial and residential properties. Streit can tailor a loan to meet borrowers’ needs and offers quick, transparent, and stress-free closings that help clients complete real estate transactions faster.