Forgotten Your Password?

Need to Register?


Structuring A Commercial Real Estate Loan

Monday, November 11, 2013 - Article by: Winstonrowe - Winston Rowe & Associates - Message


Structuring financing for a commercial property is a complex process that requires extensive documentation that must be verified through a detailed due diligence process prior to underwriting and the funding approval.

Many commercial real estate owners are turning to Winston Rowe & Associates, a national no upfront fee advisory and finance firm that utilizes a private banking approach specializing in commercial property transactions.

Every commercial real estate transaction is considered unique in most respects; the ensuing is a general description of the approach and methodology that is utilized during the initial due diligence investigation prior to underwriting for a purchase or a refinance of a commercial property.

The Application Phase:

All banks and private lenders start with an application, intake form or transaction summary document with basic supporting documentation to begin the review of the prospective transaction.

Supporting documents that are generally required during the application phase are; personal financial statements, personal and business bank statements, purchase contracts and personal credit reports.

Hence, be prepared to provide documentation and answer a lot of question during this phase of the financing process.

It is paramount that you do not misrepresent or attempt to hide any material facts during the application phase. Skilled due diligence and underwriting professionals will discover these omissions and misrepresentations and will most likely decline your financing request.

Strength of the Sponsor:

Every commercial real estate transaction starts with the commercial real estate investors' personal and business financial strength and past professional experience for the purchase or refinance of a commercial property or portfolio.

In today's current banking climate; all lenders are utilizing a global approach when performing due diligence on a prospective client. The bottom line is; the old days are over. You cannot get financed with bad credit, zero liquidity (cash is king) or commercial real estate that is in a declining market.

Property Type & Location:

There is an axiom in real estate. The three most import three things are; location, location and location. Most banks and private lenders have restriction for the markets and property types they will provide financing in.

Commercial real estate investors should consider working with an advisory and consulting firm like Winston Rowe & Associates. They have direct relationships throughout commercial finance industry.

Skin in the Game:

Purchase and refinance, commercial real estate transactions require money (cash) invested. For example; if you are purchasing, you will need a minimum 20% cash down payment.

Many investors make the mistake of thinking that a seller carry back or offering less than the appraised value meets the requirement. In today's lending market, you will need to share in the risk and bring cash to the table.

Refinance loans for commercial real estate also require skin in the game. During the due diligence investigation and underwriting process, banks and private lenders what to make sure that the investor(s) did not take out their cash through a past refinance.

Exit Strategy:

All banks and private lenders need a clearly defined and proven exit strategy of how the investor(s) are going to make their monthly mortgage payments, maintain their property and show a profit.

Didn't find the answer you wanted? Ask one of your own.

Get an answer
Subscribe to our news feed.