Knowledge Base

How to Prepare a Proposal Submission Package

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Your loan package should be submitted in a legal size file folder. Book like packages are awkward for the lender to store and file. Your file folder should be labeled as follows:

APPLE COUNTRY MOTEL
Loan & Property Information

Notice the name of deal is a property name/project name - not the name of the borrower. Give every commercial deal a project name. Notice the name of the property is in all capital letters.

I prefer to photocopy every page on legal size paper, even if the original document is letter sized, like a tax return. The unused excess paper should be at the top. This creates a nice, smooth bottom. Alternating legal and letter sized copies look unfinished and unprofessional. Commercial lenders are too fickle to spend hours and hours preparing a book like package, but some attention to aesthetics is important.

You should organize your proposal submission package in the following stacking order:

  1. Loan Summary

  2. Picture page with photograph, property address, brief property description, and brief neighborhood description.

  3. Goldenrod Divider Sheet
    IMPORTANT NOTE: Instead of using labeled tabs, which take hours prepare, I simply used colored sheets of paper to separate each major set of documents. This is fast and easy and works “good enough”.

  4. Pro Forma Operating Statement
    IMPORTANT NOTE: The higher in the stacking order a lender finds your Pro Forma operating statement, the more respect he will have for you. Commercial loans almost always boil down to the debt service coverage ratio, and this ratio is computed using the Pro Forma.

  5. Rent Roll or Schedule of Leases

  6. Statement of Actual Income and Expenses

  7. Goldenrod Divider Sheet

  8. Appraisal, if thin and already available. If an appraisal is available but thick, submit it in its own file folder. If you use a separate file folder for a thick appraisal, label the file as follows:

    APPLE COUNTRY MOTEL
    Appraisal

    Caution: Never order an appraisal until a lender has issued a proposal and the borrower has accepted it. Under FIRREA a Federally insured lender is not allowed to accept an appraisal ordered by either the borrower or a mortgage broker.

  9. Goldenrod Divider Sheet

  10. Financial Statement on borrower (if available)

  11. Front page of the borrower’s 2005 1040.

    Reminder: A proposal submission package is simply designed to see if your lenders are interested, and it is a good practice to have at least four lenders looking at each deal at all times. Since you will therefore need to send out four copies of the package, you don’t want the packages too thick at this time. You just want to send out the essentials at this point. You can shuttle the complete 1040’s to the lender if the lender expresses interest.

  12. Front page of the borrower’s 2004 1040.

  13. Goldenrod Divider Sheet

  14. Miscellaneous ESSENTIAL documents. (Avoid including anything else unless it is absolutely essential to the lender’s understanding. Miscellaneous documents can seldom help you but can often kill your deal. Use the Gosh Darn Important Test. Never submit anything to a lender unless it is gosh darn important. Thicker is not better.

 

 

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