Tips for submitting an optimal small-commercial loan packageMike Boggiano building credibility, hybrid brokers, complete and accurate documentation
An important step in building credibility and expediting
the lending process
The new face of small-balance commercial is built to make
everything from loan submissions to closings easier and more
efficient than traditional commercial lending. Many residential
brokers are finding success as hybrid brokers by offering
small-balance commercial loans. Whether you're new to commercial or
have already diversified your product mix, you'll find that
attention to detail when assembling the loan package makes a big
impact on the transaction. Submitting a complete and accurate
package is important in cementing a professional relationship with
lenders, building your credibility and closing loans faster.
Perception is reality with lenders when it comes to your
commercial loan application. Proper presentation of a loan
submission not only establishes your standing at the onset of the
process, it also demonstrates your commitment to the transaction. A
well organized, complete loan file that is properly stacked and
tabbed for the specific sections will differentiate your level of
professionalism from that of other brokers. Your file is likely to
receive preferential treatment from a lender when compared to those
that are submitted as disorganized.
Keep in mind, too, that missing information or incomplete
documents within a package can quickly affect your rapport with the
lender, not to mention delay the process. The importance of
complete and accurate documentation cannot be stressed enough.
While submission requirements vary by lender, a complete
small-commercial loan package in general should include:
The full application needs to be completed at the time of
submission. Omitting information, then adding it in subsequently
indicates a lack of control over the borrower and the transaction.
The application should be verified for accuracy and consistency
with other documentation that is provided, such as ownership
entity, borrower's income, borrower's assets, subject property
address, property occupancy and income, employment, assets, purpose
of financing, payoff amounts, terms of the purchase and sales
agreement, and credit.
The rent roll should include all rental information concerning
tenants of the property. This includes the name of each tenant,
square footage occupied, monthly rental amounts, term of the lease,
operating expense escrows and scheduled rent increases.
If you're not familiar with a rent roll, ask your lender for a
multi-tenant rent roll and certification form or similarthis should
be available online or by request.
A schedule of all tenants in the building documenting occupancy
status, the rent roll includes:
-Size of the space being rented by each tenant
-Expenses the renter is responsible to pay (gas, electric,
-Number of bedrooms/bathrooms (as applicable by property
-Current occupancy status
-Schedule of all tenants in building, documenting occupancy
The broker is responsible not only for providing a completed
rent roll, but also understanding how it affects the transaction.
For instance, if the start dates of the leases are subsequent to
the financing, this is a fairly good indication that the
transaction is either a construction loan or that the stated
occupancy is not accurate. This important detail will impact the
available financing options, as some lenders do not offer
Rents must also be in alignment with market value. Most lenders
utilize market levels for their underwriting guidelines.
Normalizing the rents allows for the recognition of the upside in
rent value for those that are below market. On the flip side,
above-market rents need to be brought in line to properly reflect
the true economics of the lease. For example, if rent is listed as
$1,000 per month but the market supports a lower monthly amount,
most lenders will use the market value. In cases where a variance
from market exists, an explanation must be provided. Below-market
rents often indicate either mismanagement or deferred maintenance
that needs to be corrected before an upward adjustment can be made.
Conversely, rents that are substantially above market may point to
ghost renters or non-arm's length leases.
Purchase and sales agreement (if
The agreement should be in full force and effect, as well as not
expired. If expired, provide an extension addendum that permits
sufficient time to secure financing on the transaction. The
contract itself needs to be complete and verified for accuracy. The
purchaser(s) listed on the sales contract should match the
borrower(s) on the loan application, and the property address on
the contract must match the application. Finally, ensure that the
sales price and financing terms on the contract match the
application. Disclose any concessions granted within the
Operating statements and tax returns of the property,
and borrower's tax returns
At a minimum, include year-to-date operating statements on the
subject property plus those from the previous two years. In
addition, two years of tax returns for the property (if the
borrowing entity is a corporate entity) and for the individual
borrowers are necessary.
Interior and exterior photos of the subject
The old saying that a picture is worth a thousand words definitely
applies in this case. Photos give your lender a feel for the
physical attributes of a property. Be sure the photos in your loan
package are actually of the subject property (it may sound inane,
but you'd be surprised).
Documentation specific to property type
In addition to the above, certain documentation may be required for
various specialty commercial properties such as automotive,
hospitality, restaurant, gas station, mobile home park and
healthcare facilities. Ask your lender or account manager about
additional requirements for these property types.
Being educated on the steps involved for submitting a complete
loan package shows dedication and professionalism. Ask your account
manager or look to online resources that can help you understand
each commercial property type and its corresponding documents.
Understanding these details, as well as taking full advantage of
what you can learn through professional organizations and
lender-sponsored trainings, can help solidify your position as a
serious commercial mortgage broker.
Mike Boggiano is senior vice president, national sales
manager for Silver
Hill Financial LLC, a national commercial real estate lender
based in Miami. He may be reached by phone at (877) 676-1562 or
e-mail [email protected]