Applying for a commercial real estate loan can be a daunting task, but it doesn’t have to be. With the right set of questions for your broker or loan officer, you can position yourself with knowledge that ultimately saves time, money, and potentially streamlines the process. A good lending partner won’t hesitate to answer pointed questions. Start with these:
“In what types of loans do you specialize?”
If you’re seeking out a specialist in commercial real estate, watch for lenders who try to be all things. Ask for specific funded examples similar to the scope and type which you may be seeking, preferably in your region. If you’re looking to fund a strip mall and you’re seeing only office tower deals in the lender’s repertoire, keep looking.
“Are you a direct lender?”
Working with a direct lender versus a commercial mortgage broker may significantly impact the fees you pay to obtain a loan. A well-networked, experienced broker can make a critical difference. For example, if your loan request is near-bankable or sizeable, your broker may be able to connect you with life companies or pensions that may lend at lower rates.
“What is your typical application processing time?”
Some lenders may claim to process a commercial real estate loan application within 30 days just to get your business, and then take months to fund the project. Get a firm commitment on that processing time. This is where private lenders typically bring a competitive edge in more expedient processing.
“Can you outline the specific documentation required for underwriting?”
Once you are close to selecting your lender, ask for a full list of all required documentation. This reply gives full visibility to the underwriting process, gets you familiar with the phases and types of needed documentation, and hopefully helps prevent any delays.
“What is your process for construction draws?”
For a construction or renovation loan, particularly, construction draws (fund withdrawals for the construction phase) can make or break the contractors you retain and your project progress. Understand the draw schedule, how inspections are handled, specifics around fees for draw or inspection, what documentation is required for draw requests, and consequences for any line item that may go over budget.
“Beyond baseline rates and fees, what are your other terms?”
A lender’s rates, fees, and required loan-to-value (LTV) are of course significant, but when seeking a commercial real estate loan, inexperienced borrowers often neglect to inquire as to other key terms, including: loan term, amortization or potential balloon payments, other costs, recourse, extension policies, and standard default provisions.
“Are you able to provide comparable loan references?”
Especially for private lenders, which are not under the same regulation as bank lenders, credible lenders shouldn’t hesitate to provide references from clients for whom they have funded similar projects, if requested. Transparency matters.
By securing an experienced broker or loan officer, you’ll have an alliance for zeroing in on the type of financing that best suits your project and vision. At Juniper Capital we strive to be a source of valuable information and expertise in the world of commercial real estate finance. Have a question? Call us today to speak with one of our experienced loan officers to determine if Juniper is the right fit for you.