Commercial Loan Processing Time
Commercial lenders universally exaggerate how quickly they can process a commercial real estate loan. They'll tell you over the phone that they can close your commercial real estate loan in just 45 days. That's a bunch of hogwash! The truth is that most banks and CMBS lenders will usually take at least 3 months to close the typical commercial real estate loan.
Now don't panic. If you've got yourself backed up against the wall, I have some suggestions below. But for now, let's get back to the discussion.
Why does it take so stinkin' long for the typical bank or conduit to close the typical commercial real estate loan? First of all, banks and conduits need a fairly thick stack of documents before they can underwrite a loan. They'll need copies of all of the leases, a rent roll, historical operating expenses, a financial statement on the principals and usually tax returns. All of these documents take several days to gather.
Next, the third party reports - the appraisal, the toxic, and the engineering reports - usually take at least 6 to 7 weeks to complete.
And these third party reports are expensive. On a commercial real estate loan of $1.5 million, the third party report fees for a bank or conduit can easily exceed $5,000. Therefore most commercial borrowers don't want to fork over a big 'ole check for $5,000 until the commercial lender has at least issued a letter of interest. Because it usually takes a commercial real estate lender several days to underwrite the package and prepare the letter of interest, this further delays the process.
And then there is mailing and delivery time.
So when the dust all settles, it usually takes a bank at least 3 months, and often 4 months, to close the typical commercial real estate loan.
Therefore if you have a balloon payment on your commercial property coming due, be sure to start your search for a new commercial real estate loan at least 6 months in advance.
Don't wait until the last moment. Commercial lenders are a bunch of "story-tellers". If you believe what they tell you over the phone (45 days), you might find yourself forced to file a Chapter 11 bankruptcy in order to keep a commercial lender with a ballooning loan from taking your property in foreclosure.
If you are involved in a purchase transaction, you should be sure to leave yourself at least 90 days in the contract to secure commercial financing. If it were me, I would also ask for the right to extend the contract for an 30 extra days, just in case.
Now the last thing I want to suggest is that C-Loans lenders are slow. Because C-Loans has over 700 participating lenders, our commercial lenders statistically represent a good cross-section of the industry. We have some fast commercial lenders and some slow commercial lenders.
If you are backed up against the wall, with time running out, you should apply to a number of hard money lenders. Hard money lenders are more expensive than banks and conduits, but they can often close in less than 30 to 45 days. You can apply to hundreds of hard money lenders, as well as hundreds of banks and conduits, using C-Loans.com.
One solution would be to apply to me, George Blackburne, directly. I own both C-Loans, Inc. and Blackburne & Brown, a $50 million commercial hard money shop. Just send me an email describing your deal, along with your contact information. I'll reply right away either way. If I like the deal, I'll tell you and then turn the deal over to my top loan officer. Since I'm Loan Committee, a deal coming down from the top jumps to the top of the stack.
I'll need the size of the loan (our maximum deal is $3MM), the property type (we only do apartments and commercial properties, no homes or 4-plexes), the location, and some details on your situation. We are a hard money lender, so we are fast but more expensive than a bank. Blackburne & Brown, however, is probably the cheapest of the hard money lenders, so that's good. Just send the deal to email@example.com.
Do you need a commercial real estate loan? If your deal is an "A" deal or too large for Blackburne & Brown, you can apply to 700 different direct commercial lenders with just one click of your mouse. And C-Loans is free. Please click here.
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