As a commercial mortgage broker I communicate with prospective commercial developers every day. Often I was surprised by the lack of specific knowledge about what was needed for commercial construction projects to get financing. This article will discuss what must be included in a loan submission package that is good for commercial development projects.
The last thing you want to happen to your financing proposal is to have land at the bottom of the stack at the bank loan officer table. Each loan package for commercial construction projects must contain several important elements or will be ignored, or even rejected.
The first element of a good commercial construction loan package is an executive summary. The executive summary describes the project in the form of a paragraph and describes the project, location and general strength of the agreement.
The second important material with a loan package is a detailed resume of project principles and general contractors if it has not become a principle. Resume must include a list of actual project details completed. Specific experience is the main component of the loan package.
Pro-forma projections on projects and net income are expected to be needed. Detailed details and analysis must also be included. Information about property demographics, absorption studies, marketing and management plans, etc. all must be included. The more detailed information is getting better.
Personal financial statements for all partners, general contractors and all business partners for the past three years are needed.
Information must be provided on all pre-sales along with pre-sales evidence. Banks and lenders like to see at least 50% of pre-sales projects.
The three most important ingredients in commercial development loans are money, experience, and pre-sales. You must have 2 out of 3 to take a shot. You need all 3 to be guaranteed.
Most of these transactions fall on financial and pre-sales. And after digging, often lacking experience appears too. Minimum you need to get offers is an executive summary and pro-forma. The rest is needed to send.