Sizing up your commercial loan (aka; pre-underwriting) is a MUST if you are in the lending business.

Here is an example of a common problem in this field...

"Loan agent/broker submits their borrowers/buyers financial package to the lender...obtains
the LOI (letter of interest)...has their borrower complete a loan application...collects the 3rd party fees...and
later receives a phone call from the bank loan officer telling you the loan won't get past underwriting or the
credit department."

The agent/broker now commences to shop the loan through multiple lenders. The results most probably will come back the same.

Should proper vetting or loan pre-qualification have been addressed prior to submission to the lender?

Keep in mind that not all buyers will qualify for the financing they need. Get them pre-qualified before
they enter into the purchase transaction.

In today's lending environment, many quality borrowers are being rejected for reasons that may have been
overlooked prior to the mortgage meltdown.

There are 2 areas to focus on when pre-qualifying your client for a commercial loan...


The borrower needs to be vetted.

Obtain the following documentation from your borrower;

* 3 years personal & business tax returns (all pages & schedules)
* Personal financial statement or 1003 form
* 3 months of most recent banking statements
* 3 years of borrowers profit & loss statements (if applicable)
* Year-to-date P&L statement (if applicable)

Abstract your client's net cash flow and liquidity from the tax returns and financial


The property needs to be vetted.

Size up the property to ensure the debt coverage ratios are in line;

* Do your loan analysis to make sure the NOI (net operating income) will debt
service the loan your borrower seeks (if property is income producing).
* Take photos of the property
* Use appropriate interest rates and DCR (debt coverage ratio) when determing
how much loan the property's income will support
* Does your borrower's net income support the debt (if "owner user" loan)?

If you already do your own loan and property analysis, then you should know what to do.

For the layperson, if you are confused about what I've just described, basic commercial
loan training is needed.

Establish a rapport with your commercial bank's loan officer and he/she should be
able to carry you along until you become good at this.

Submit your first commercial loan to them and you will learn a lot about the processes.

Author's Bio: 

I have been providing commercial loans to the Southern California markets since 1999.
My services are all about providing the real estate investor or owner user with the best commercial financing options available.
My personal niche is working with multifamily, retail, office, owner-user (SBA and NON-SBA) and industrial properties.
1988 is when I started my career in commercial real estate.
I was a corporate officer for Total Investments Company, Los Angeles, Ca. directly in charge of asset/property management, leasing and a key team player in acquisitions due-diligence.
Total's portfolio consisted of retail, multifamily and industrial properties spread throughout the Los Angeles and Orange Counties.
In 2000, I founded Phoenix Capital Consulting LLC with partners who had relinquished their banking positions to become independent loan consultants.
During this time, I was also Vice President of Acquisitions & Finance for Hunt Enterprises Inc, Hawthorne, Ca...with real estate assets in commercial, multifamily, office and industrial properties located throughout 5 counties in Southern California.
Phoenix Capital Consulting now encompasses 100% of my time and activities. I am quite pleased that our relationship base with various commercial mortgage lenders is rock solid and continues to grow.
To this end, I my strengths are in working with real estate portfolios whether it be purchase or refinance loan transactions, acquisitions due-diligence, value enhancement of troubled real estate assets and management of mid to large scale properties.