Required Commercial Lending Documentation

Clearly, commercial lending is a bit different from your standard residential lending, which means you will more than likely have to provide slightly different documentation than you may be used to providing. Of course, that is not to say you need a completely new set of financials, but rather that there are some additional requirements for the commercial lending process.

The truth is that the commercial lending process can be a little overwhelming, especially when it comes to the required documentation. However, there is good news—you figure out what is going to be required of so you can be properly prepared for all your lender requirements and standard commercial real estate regulations. With that being said, if you are working on a more complexed commercial deal, you will definitely need to consult a real estate attorney in order to put together the attorney-prepared agreements.

Moreover, you need will a promissory note. If you are not new to the business, then you know that a promissory note is a document the borrower must sign in order to undertake any and all obligations such as meeting the terms of your loan. In addition to a promissory note, you will need to have a loan agreement with your commercial lender. Your loan agreement will generally have the standard information included such as representations and warranties, conditions precedents, negative covenants, affirmative covenants and language regarding what happens in the event of default.

Besides these two vital pieces of documentation, you will more than likely need to supply your lender with your corporate resolution, disclosure and authorization forms, mortgage of deed-of-trust, and Guaranty. You will also need to produce a variety of other agreements (subordination, inter-creditor, assignment, pledge, security, deposit account control, error and omission, etc.). Ultimately, these above-mentioned documents and agreements are, in a way, just the tip of the iceberg. But, nevertheless, this overview can still help you be prepared for your future lending process if not get the ball rolling in the right direction.

Final Things to Consider

In addition to being well-informed in regards to the necessary documentation, it also helps to have a better understanding of several key loan concepts. In other words, this means brushing up on the difference between secured and unsecured loans as well as determining if a negative pledge or letter of credit is necessary for your particular loan. Moreover, it means assessing if a term, demand, bullet, amortizing or revolving loan is best for your financial situation. Of course, if you are not sure which of these particular loan types will work best for your commercial venture, then now is the perfect time to do some additional research or reach out to an experienced broker. It is also helpful to really take the time to go over your loan agreement in detail and ask questions about any terms or provisions you do not fully understand.

Help that’s right for you

In end, you want to make sure that there are no surprises. Remember, the better informed you are, the easier it will be to negotiate your loan terms and go over any issues that arise with your lender.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.