It is common for businesses to need commercial loans both at the start-up phase for equipment and later on, for expansion, or special projects. Real estate has become a major sector of the loan business. A significant fraction of the nation’s total wealth is in the form of land and buildings. The purchase of real estate requires a large investment; hence commercial banks and other commercial lenders have emerged as major players in the real estate financing market. Specialists are often called on to valuate real estate and facilitate transactions. Brokers play an important part in the commercial real estate industry. Not only do they bridge the gap between the buyer and seller but also evaluate the borrower and help them find the right kind of lender. They also help negotiate the best terms, fees, and conditions from various lenders.
Hiring a commercial real estate attorney who is experienced in loan negotiation is a prerequisite for a successful transaction. Commercial lenders prefer that borrowers have a business plan and a percentage of the required cash available as a down payment, prior to sanctioning a commercial real estate loan.
They tend to pre-qualify potential borrowers, to determine how much they can afford to repay on a monthly basis. This also gives them the opportunity to gauge which loan program would be best suited to the needs of the borrower.
A loan officer or loan processor reviews the borrower’s credit reports, the amount of available collateral and income. Preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries are also submitted for a commercial real estate loan.
After the sanction of a loan, the attorney files deed transfers and mortgages, orders title insurance, coordinates the exchange of funds, and arranges for the signing of the loan documents. Sanction of the loan may take place within 7 –10 business days after approval or underwriting. When the procedures are complete, the lender executes the loan with a cashier’s check, draft, or electronic wire transfer.
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