Requirements For A Commercial Loan
Terrydale Capital
Apr 8, 2024 6 Min read
When it comes to financing a commercial real estate property, it is beneficial to be in the know of the initial steps of the process. This can help not only get your investment journey off of the ground, but can help expedite the timeliness of the process. In this blog we will quickly divulge what a borrower needs to bring to the table in order to begin the financing process and tips for the best ways to improve your leverage in the process.
Personal Financial Statement (PFS)
Personal Financial Statements (PFS) are documents that provide a detailed overview of an individual's financial position, including their assets, liabilities, and net worth. These statements are often used by lenders as part of the loan application process to assess an individual's creditworthiness and ability to repay the loan. You can access a template for a personal financial statement here.
Schedule of Real Estate Owned (SREO)
A "Schedule of Real Estate Owned" (SREO) is a document commonly used in financial or lending contexts, particularly in commercial lending, to provide a comprehensive overview of properties owned by an individual or entity. This schedule typically includes details such as property addresses, descriptions, values, outstanding mortgage balances, and income generated from each property. You can access a template for an SREO here.
Tax Returns
A tax return is a document filed with a government tax authority that reports income, expenses, and other pertinent financial information used to calculate and pay taxes. Individuals, businesses, estates, trusts, and other entities are typically required to file tax returns annually, though the specific requirements and deadlines vary by jurisdiction. Typically for financing, there is a requirement of at least 2-years of tax returns.
P&L Charts
P&L stands for Profit and Loss. It is a financial statement that shows a company's revenues, costs, and expenses over a period of time. P&L statements are useful for businesses to evaluate their financial performance, and are often used to determine the profitability of a commercial real estate property. You can access templates for P&L’s here.
Rent Roll
Rent rolls are commonly used by property owners, landlords, property managers, and investors to track rental income, monitor lease expirations, and assess the overall financial performance of their real estate assets. They are an essential tool for managing and analyzing rental properties effectively.
Influences on Your Financing Leverage
- Credit: Depending on the borrower’s credit, rates can range. The higher the credit score of the borrower, the higher likelihood of favorable rates.
- Liquidity and Net Worth: The availability of liquid assets from the borrower and the overall net worth, contributes to the leverage when approaching financing and can impact the down payments and overall rates one can attain.
- Down Payment: The down payment is the initial payment made at the outset of an investment purchase. Down payments can be dictated by asset types and lenders can enforce LTV and down payment minimums and maximums.
Conclusion
Getting ahead of the commercial real estate financing process is invaluable when it comes to preserving your time and making sure the process is as smooth as possible. As always, it is beneficial to have the right team beside you to assist in navigating the entirety of the process from beginning to closing. Terrydale Capital boasts a collective commercial financing experience coupled with broad industry connections that give our clients the most competitive financing options available. Contact us today to get started.
Partner With Terrydale Capital for Your Debt Financing Needs
When it comes to debt financing, understanding the right timing, process, and options is crucial. At Terrydale Capital, we provide a comprehensive range of commercial loan solutions tailored to meet your business's unique needs.
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Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
