Commercial Loans Blog

Requesting Commercial Loan Documents

Posted by George Blackburne on Thu, Oct 4, 2012

One of the biggest mistakes commonly made by rookie commercial mortgage brokers is to request far too many loan documents during the first phone call.  Such a mistake is almost guaranteed to kill your commercial loan deal.

These rookie commercial mortgage brokers are no doubt thinking to themselves, “The sooner I gather a complete commercial loan package, the sooner I can submit the deal and get paid.”

The problem with this approach is that most commercial mortgage borrowers are wealthy and busy running their own businesses.  They are not anxious to devote long hours assembling a huge commercial loan package for you when they are not even sure that you will be able to perform.

If you ask for a huge number of loan documents (financial statements, tax returns, leases, LLC operating agreements, etc.), the borrower is likely to think to himself, “Gee, that’s an awful lot of work.  I wonder if someone else out there has an easier process.  I think I’ll make a couple of more calls.”

Therefore it has been my observation that –

The commercial mortgage broker who asks for the least number of loan documents usually gets the deal.

There are other dangers to asking for a complete loan package.  Invariably your commercial loan borrower will not be able to gather every document immediately.  Maybe he’s waiting for a lease extension to be signed.  Maybe he’s waiting for his accountant to complete the latest financial statements on his company.

Since your borrower will not be able to send in a complete loan package, he might not send in anything at all.  He’s thinking to himself, “I’ll just hold off sending in the package until I have everything.”

In the meantime, stuff happens.  A nearby banker might stop by your borrower’s office for his annual business development (schmoozing) session, at which time the banker steals your commercial deal.  Alternatively, your commercial mortgage borrower might mention to his real estate broker-buddy that he’s looking for a commercial loan.  Soon the lead will be rushed to a competing commercial mortgage company, and they could steal your deal.  Given time, there is a very high chance (80%+) that you will lose your commercial loan applicant.

The wise commercial mortgage broker will therefore do everything he can to encourage his borrower to send in some sort of initial package right away.   The package does not have to be complete.  It is just critical that you not allow any delay.

And whatever you do, never-ever-EVER send your borrower a complete list of the documentation that he will eventually be asked to provide.  No-no-no!  Such a description of a complete package is so intimidating and discouraging that it is 100% guaranteed to send your borrower running towards the hills.

In fact, in my 33 years in the commercial mortgage business –

I have lost every single commercial loan app where I sent the borrower a list of the items required in a complete package. 

One hundred percent.  A perfect score.  Because I’m stupid, I tried it over 1,000 times.  Out of those 1,000+ times, I received exactly zero loan packages.

Don’t even do it over the phone.  If you find yourself giving your commercial mortgage borrower over the phone a complete list of the documents that you will eventually need, you have just killed your deal.  Bang!  You just shot a bullet into your deal’s head.  You just stuck an ice pick through its eye.  You just dropped a house on your deal.  Your commercial mortgage deal – as the munchkin’s coroner sang in the Wizard of Oz – is really most sincerely dead.

So never-ever send or verbally give your borrower a complete list of the loan documents that you will eventually need.  The list is way too long and scary.

So how do we request loan documents?  We’ll cover that in an upcoming lesson.

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Topics: commercial loan documents