As a builder, developer or investor, at some point you have to apply for your first commercial construction loan. Even if you’ve been in the business as part of another team, you may not know everything that goes into getting a loan like this. Gathering together proper documentation prior to putting in a loan application makes the process smoother, so we’ve put together a list of typical things you need to put in a loan application. For a refresher on terminology, please refer to our article on Construction Loan Terminology.
Credit Scores
Your lender will request access to your credit scores during the application process, and this is something you should have an understanding of before you walk in the door. Credit scores of substantial owners and/or officers demonstrates how those key people manage finances.
Identifying Information
You will need to have your personal identification, such as a drivers license or passport, as well as your business documentation. The lender will look to establish that yourr business is legally registered to do business. s Expect to provide a Federal EIN number and any certifications or permits required by law that are applicable to your business. You will also need an address for yourself and your business, and contact information like phone numbers and email addresses. This may seem like a given, but not everyone is aware that you need both personal and business information for a loan.
Tax Returns
Tax returns may be required or the requirement may be waived, e.g. for low leverage loans. Assume two years of tax returns or filings for both substantial owners and your business.
Business Bank Statements
The majority of lenders will want to see your most recent bank statements; each lender has their own requirements for this. This may be about verifying liquidity. Some lenders may look to see how you manage your funds, if you have a lot of overdrafts or insufficient fund fees. Be prepared to provide at least two months worth of statements.
Other Financial Information
Personal and business financial statements including balance sheets will be handy to have when you apply for the loan. These documents show financial strength.
Use of Loan, Business Plan, Collateral
Lenders want to know what you’re using the funds for, which will be outlined in your budget. Financial institutions want to ensure that you have documentation to back up what you are telling them, that there is a plan and a way for the lender to recoup funds should you fail to make payments.
Some financial institutions may have different requirements depending on the loan type, so be sure to check with them before going in to apply. Gathering this information prior to doing the application will make your loan process more efficient and easier to manage.
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