How to Make Your Commercial Loan Process Easier
Are you considering refinancing the
existing loan on your commercial real estate? Maybe you want to lower your
overall monthly payments, lock in a low fixed rate, or take cash out for
property improvements. Maybe you want to
invest in another property, or refinance an existing note with a upcoming
balloon payment? Even if you aren’t currently considering a refinance, it might
be prudent to do so given the current interest rate environment and the overall
health of the credit markets. Markets are cyclical and the 10 year treasury has
just hit a high, marking what could be the long awaited increases in long term
The Madison Group works with clients to
help them determine if a refinance is the right option. Here are some factors and tips for you to
consider before you start the refinance process.
Top 10 tips to make your refinance process go smoothly
Prepare your profit and loss – the lenders
will ask for 3 years and a trailing 12 month by month
Have an up to date rent roll that includes
move in, move out, lease terms
File your taxes – you are normally asked
for 3 years of personal and business
Know the value of your property
Determine if your current loan has a
Have a personal financial statement
prepared to show your net worth
Create a schedule of real estate owned that
includes property values and debt
Prepare a proforma for your income and
expenses for the property for the next year
Be aware of any competing properties in
10. Be realistic on how much time your need to get a new loan in place.
to begin? The
first question to consider is whether or not you have a prepayment penalty on
your existing loan. You can determine
this by reviewing your loan documents or calling your lender to ask about the
penalty. Make sure that you are not
“locked out” of any prepayment of the loan and also review the documents to see
if you will have an exit fee. It will be
important to understand all of the fees associated with the payoff of the loan
in order to make the best decision financial decision. If you have a loan that is maturing, be sure
and check the prepayment open period.
These periods typically range from 3 – 6 months, and you want to be sure
to begin the refinance process well in advance of the maturity date.
next step: If
you determine that a refinance is your next move, you will need to prepare some
paperwork to determine if the loan is feasible.
Lenders will look at your current and historical cash flow, along with
rent rolls to determine a value and debt service coverage on the property. The professionals at The Madison Group can
analyze the information you provide to quickly determine your ability to
your paperwork: Lending professionals will require that you submit a personal financial
statement with a detailed schedule of real estate, 2 years of personal and
business tax returns, 2 years of profit and loss statements on the property
along with year to date information and a current rent roll as part of a basic
underwriting package. They will also
request details on capital improvements to the property over the past few
qualify, now what? As you move forward with the refinance, you will next want to consider your
long term outlook for the project. Are
you keeping it long term? Do you have
some much needed improvements to do? Do
you have lots of equity that you could reinvest at a low cost of funds into
another asset if you were to cash out the property? Is your strategic plan to
sell the property in the next few years? There are many options to consider as you
move forward in order to make the most prudent decision now.
type of loan do I want? Now
that you have thought about the process and what you would like to achieve, you
will need to determine what type of loan you want. Do you need recourse or a non- recourse loan? How long of an amortization do you
want? The difference in cash flow on a
25 year am vs a 30 year am can be significant.
Do you want a self-amortizing loan?
Are you comfortable with a shorter term fixed portion of the loan if it
gives you the ability to prepay and sell the property at some point in the
future? There are also many options for
fixed and floating loans. When calculating
your savings, you will need to add this into your calculations. You may also be asked to make an upfront
deposit to pay for third party reports and legal. Once you decide upon a strategy, be sure and
ask these details up front.
professional at The Madison Group will partner with you every step along the
way to the loan funding. They work with
the third party reports, and underwriting conditions, to ensure you have a
success closing. Often, unknown
conditions pop up, and the team is invaluable to eliminate these potential deal
Group has a proven approach to commercial real estate loans:
give fast, straight forward answers to your lending questions.
person will handle your file from start to finish.
will eliminate the tangle of paperwork.
our loans with direct lenders
refinancing your commercial loan, consider hiring an experience commercial loan
broker like The Madison Group, you will save time and effort.
Please give us a call
if we can assist you with your loan needs