Loan Approval Process Best Practices

Loan Underwriting Checklist

Having to prepare and collect the necessary documentation for a large commercial loan request for your new construction Choice project can be time consuming and can sometimes delay your financing process. A detailed loan underwriting checklist is available to allow you to begin collecting the documents that a bank will more than likely request during the credit underwriting process for your construction loan.

The downloadable checklist is a generalized list of personal, business, and project related documents that are normally requested by a lender/financial institution when preparing your loan request for their credit approval process. The loan underwriting checklist is available to you so you can begin to collect the necessary documents in advance so you can cut down on delays in your financing process.


To better prepare you for the financing process, the below “Best Practice Tips” for Pre-Loan Approval (Application and Underwriting stage) and Post-Loan Approval (the Closing and Funding stage) have been created and are available to you for reference.

The noted information includes general tips/recommendations to help you better prepare yourself and improve the overall financing process that you will take on to get your construction loan in place for your Choice project.

Pre-Loan Approval

To ensure a smooth transition from underwriting through the loan approval process a presentation of the best practice’s tips has been created for our franchisees in order to better inform them on how they can improve their experience working through the lender’s approval process.

Below you will find the best practice tips that will assist in getting your loan approved in a more proficient and timely manner.

  • We strongly encourage that the franchisee remains in contact with your lender/financial institution. Open communication is the key during the underwriting and approval process;
  • Be proactive in answering questions posed by your lender/financial institution and provide any additional requested documentation in a timely manner;
  • Please ask questions to stay in tune with your lender to make sure you understand their approval process and decisions;
  • We encourage franchisees to make sure to discuss the terms of the loan and other lender requirements early in the in the underwriting process, so you can ask questions and understand what the bank is expecting once approving the loan. If there are items in the approval that you do not agree with or do not want, this will mean many lenders will have to get additional changes re-approved which will only delay the loan approval and loan closing process in the long run;
  • Ask the lender to explain their approval process as each financial institution is set up differently on how loans get approved. See if they can provide the steps of the process to include an estimated timeline for your approval. Please note if you utilize SBA and USDA programs you may have more than one approval to get accomplished;
  • Please make sure you provide the required financial documentation to your lender/financial institution as they can not get a formal approval without it;
  • If this is an SBA or USDA loan, please request that the lender provide all of the required application documents so you can complete them and have them ready by the time the loan is approved. This will cut down on your loan submittal time;
  • If this is an SBA or USDA loan please go ahead and sign/date all personal & business tax returns, your personal financial statements, interim financials, projections, and business plans that you provided to the lender/financial institution. Each loan program requires that all stated documents are signed and dated;
  • Each franchisee should begin collecting and arranging their closing documents as soon as possible so once a loan is approved the documents are ready and available to submit to the lender/financial institution. Doing this best practice can decrease the time associated with your loan closing;
  • Be prepared to pay a “good faith” deposit to your lender/financial institution. Most banks will collect this deposit, so they can order the required reports and or other documents for your application to include appraisals, environmental, etc.
  • Please communicate any changes to ownership, changes of construction contractors, changes in management and or structure of the small business entity to your lender as it can ultimately affect the approval and whom will need to guaranty the proposed debt. On SBA or USDA loans changes to ownership in the business, entity can change the eligibility of your entity for the program.

Post-Loan Approval

Congratulations, your loan has been approved! To ensure a smooth transition from loan approval through the closing process, a presentation of the best practice’s tips has been created for our franchisees to prepare each franchisee and to improve their experience working through the closing process.

Below you will find the best practice tips that will assist in getting your loan closed in a more proficient and timely manner.

  • We strongly encourage that you request a conference call with the lender/financial institution once you have the loan approval and or SBA loan authorization to better understand what is expected of each party involved in the closing. This will allow you to understand what documents are required for closing;
  • Stay in constant communication with those involved in your closing process which could be the lender, closing employee of the lender, the closing attorney’s office, and if SBA 504 the CDC involved;
  • Please ask questions to stay in tune with your lender to make sure you understand what is expected of you during the closing process;
  • We encourage franchisees to keep all informed of any changes to the ownership and entity changes as it can ultimately affect your loan approval and or eligibility if you have an SBA and or USDA approval;
  • Franchisees should begin to work on insurance requirements as soon as possible. To note for SBA approvals may have a collateral assignment of life insurance requirement which can take considerable time depending on the amount of life insurance required;
  • Franchisees should keep in mind that the lender and or if the SBA or USDA programs are being utilized, may want to revisit your financial situation before the loan is closed/ or if SBA 504 after construction so they may request updated financial information be provided (personal and business if operating);
  • During construction, the franchisee is highly encouraged to keep accurate records of all expenses paid to date outside of the lender’s draw requests. Each franchisee will have to document project costs spent to date, that would include not only receipts but also cancelled checks/bank statements to confirm payment was accurately made to said vendors. Good practice is to keep this in a box and or computer folder for easy access. Another suggestion is to go ahead and provide documentation to the lender and or SBA CDC (for SBA 504 loans) once a month, so they can have a running record and create a spread sheet of expenses;
  • If utilizing SBA or USDA loan programs, the franchisees will have to document equity injection requirements as set forth in the loan approval. Best practices, keep at least three months of bank statements of the account(s) the cash injections coming from along with all receipts, cancelled checks or bank statements to show items paid have cleared;
  • Franchisees will need to be prepared to possibly pay closing costs and or other costs that may not have been eligible for SBA or USDA loans if utilized at the time of closing. The closing statement will reflect what is required to be paid at closing.
  • Please also note if utilizing the SBA 504 loan, Franchisee will have two closings in which closing costs will be associated with both and will need to be paid by the Franchisee if not included in the total loan financing package;

Questions?

Choice has a dedicated loan consultant, Yolanda Merriweather that can also facilitate your needs when it comes to lender resources. You may contact her by submitting your question(s) below.

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    Updated on December 23, 2020

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