When you submit your business loan application, it may seem like it disappears into a black hole. But understanding how the commercial loan processing system works can help reduce your anxiety while you wait for approval.
Some lenders like to prequalify potential borrowers to determine how much they can afford. This will also give you and your lender an opportunity to see which loan program would be most appropriate for your needs. The lender will gather basic information, such as your income and existing debts. To initiate the loan process, you must then complete and submit a loan application.
Once your application is received, a loan officer or processor will review your credit reports, the amount of available collateral, and your income. Your loan officer will determine if any additional documentation is required, such as personal financial statements. If you are purchasing real estate, you may also need to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries. If you are going through a broker, he or she will package your loan request and submit it to several lenders for approval.
After your commercial loan package is submitted to the decision makers either a loan committee or underwriter the processor will present you with a letter of intent or term sheet. This is a formal document intended to ensure that all parties involved (the lender and your company) are on the same page. The letter of intent may include the names of involved parties, amount of financing, type of security (collateral), and other key terms. Decisions are usually made in one to five days. During the underwriting process, you may need to furnish additional documentation.