I know how YOU do it, how would OTHERS do it?

March 23, 2009 7:47 AM

I need to write about "how to get a commercial construction loan". How do I find general information about that subject which is not sponsored by a specific lender?

I just got hired for a freelance gig writing simple, general-information financial articles for a new web site, and one of the articles that I need to write is a 400-500 word piece about the process of obtaining a commercial construction loan. But all the links I'm finding about that process are all in the "Welcome to BigMoney Banks, apply for a loan from us here" vein.

I'm looking more for information like, "step 1 -- get this specific paperwork together, step 2 - shop around for a bank, step 3 -- file everything, step 4 -- profit!" variety. Any links or personal anecdotes are welcome. Thanks!

posted by EmpressCallipygos to work & money (3 comments total)

Maybe call someone at the Urban Land Institute, the real estate developer's industry group. Maybe poke around their website too, but I don't know if there's much free stuff there. They also have a decent book on real estate development which would covering construction financing.
posted by mullacc at 8:13 AM on March 23

I used to work in a commercial lending shop. What happens when you apply for a loan is that the lender puts together kind of a term paper or a story, if you will, about you and your loan request that s/he presents, in person or electronically, to a loan committee. The smaller a bank the more likely it is that your lender will get face to face with a committee and present your information for a vote. So, you have to provide all the legs of the table that will allow your lender to sell your loan to a bunch of other people.

Basically, you have to get all your financial together. This will vary depending on what kind of business you have, and what kind of loan or bank you go with. A community bank may take more personal assets under consideration, for example, than a big bank will. Some of our guys (mostly builders, ha, I know) had a "personal financial statement." But, they were also almost always partnerships or LLCs. This includes tax records.

Right, you have to have all your business financials together as well. Tax records, business license, bios of your key people, etc.

Then, you wait. They will pull your credit and look into your business. But then again, you asked them to.

How you actually get the loan is to have a healthy business in an industry that is doing well or is underrepresented in your area, and it's also by making friends with your lender. You have to have good personal credit, and also good credit history with your business. If you are not paying your bills on time, no matter why, you are hurting yourself, even if it's because people won't pay you. If your customers are not paying that means you do not select customers very well, and if you don't select customers well, then you do not have good business judgment, . . .you see where this is going? that's how it works. It helps to know a guy who knows a guy.

It works differently if you are applying for say, an SBA loan, but if you are applying for a general commercial loan of some variety, that about covers it. A lot goes on behind the scenes, but it's really simple: Gather your financial documents, give it all to the lender, wait.
posted by Medieval Maven at 8:22 AM on March 23

MM, I've contacted you via regular email -- thanks.
posted by EmpressCallipygos at 9:43 AM on March 23