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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   March 2008

Turn In and Stay Tuned

Remain in the loop post-application to help borrowers finish a deal successfully

You may think that your work on a commercial loan is finished once you have completed an application and prepared a complete financing plan for your borrowers. But this is not the case. You are done with the pre-application phase, but you still have a role to play in the post-application stage.

Two critical steps that are paramount to a deal’s overall success take place post-application, and they require a considerable amount of detail work. You must work with your borrowers to complete any missing documentation, and you must take the lead in communication between the two parties. Only then is your role in the deal complete.

A deal cannot close without proper submission of required documentation. It seems simple enough, but this process still causes many problems. Borrower confusion and apprehension typically slow down this process. You can play a role in alleviating these issues.

Borrowers may be confused about the kinds of documentation the lender requests or why the lender is requesting them in the first place. Help them understand what has been requested and assist them in collecting the data.

It is wise to evaluate the lender’s list of requirements before providing it to the borrowers to ensure that everything is clear. That way, if it isn’t, you can easily call upon your lending partner for clarification.

Borrowers may be apprehensive about fulfilling some of the lender’s requests. For example, lenders sometimes require personal tax returns from the borrowers. If the borrowers balk at sharing this personal detail, explain that this personal information is a requirement especially when dealing with nonrecourse loans because the lender is placing its money in the hands of strangers who technically demonstrate no personal liability.

You can also help the borrowers understand that it is better to turn over questionable documentation and have a discussion with the lender about it than to not provide the document at all.

Once you’ve submitted your documentation to the lender, you should continue to act as a communication bridge between the lender and the borrowers. After reviewing the documentation, the lender will typically have questions for your clients. In many cases, its underwriters will scrutinize the business plan or even conduct their own research into rents, costs or the borrowers’ previous work history. Improve the chances of the deal by working with your borrowers to respond quickly to any questions that may arise.

For instance, the underwriters may notice that the borrowers’ rents on an apartment deal are 25-percent higher than those on competing apartments in the market. The lender might request that the borrowers explain in writing why people will live in this building despite the higher costs. Or the lender might ask the borrowers to explain why they believe they can build and lease a 75,000-square-foot shopping center when their largest previous property was 25,000 square feet.

Borrowers, especially those with minimal experience, may be easily intimidated by these types of questions. Work with them to take a step back and understand why a lender might ask such detailed questions. Then help the clients craft detailed, written responses that address the questions.

When you take a deal beyond the application phase, you can enhance the process with your smarts and communication skills. By paying attention to detail and acting as an ombudsman between the borrowers and the lender, you help ensure that a deal maintains its momentum and continues down the path toward funding. 


 


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