The Commercial Loan Application Process: What to Expect

If you’ve never been through the commercial loan application process before, it can be surprising to some just how different it is from standard residential mortgage applications or other loan processes you may have completed in the past.

Here are four things you should expect when applying for a commercial loan:

1.    A Unique Process

The commercial real estate loan application process is quite different than what you may have previously experienced when buying a home. For a residential mortgage, the lender would have looked at your personal credit and income to determine your ability to pay your mortgage payments.

On the other hand, a commercial loan underwriter is looking not only at your personal and business finances, but they’re also analyzing the property itself to ensure its historic and future income can support the debt of the loan, as well as any other property-related expenses.

If you’re receiving funding from a traditional bank lender, the commercial loan process can take several months to complete. This can be an unexpected part of the process for first-time commercial loan applicants.

2.   The Amount of Documentation Required

With the added scrutiny of the commercial loan application process, you should be prepared to provide a wealth of documentation pertaining to your personal and business history and goals. It’s not uncommon to be asked for any (or all) of the following documents:

●     Business and/or personal bank statements

●     Your business tax ID

●     Business and/or personal tax returns

●     Profit and loss statement

●     Balance sheet

●     Debt schedule

●     Business legal documents (ex: licenses and permits, proof of insurance, articles of incorporation, etc.)

●     Your business plan

It should be noted, however, that some non-bank lenders offer reduced documentation loans that can streamline the amount of paperwork and history needed to get a loan.

3.   The Number of Available Loan Options

With commercial real estate loans, you have a wealth of different lending options available to you. There is always the traditional bank route, but new options like non-bank lenders, hard-money lenders, and even peer-to-peer lending are making it easier than ever before to find funding that meets your unique goals and situation.

4.   The Actual Funding Process 

You may also need to set your expectations for how long the actual funding process can take. It’s not uncommon for the loan process to take several months with a traditional bank. On the other hand, with all the right documentation in place, a non-bank lender can often close in as little as 35-45 days.

If you’re considering a commercial loan for your investment property, be sure to connect with our team today to learn more about your funding options.