Here’s How

Traditional Loan Process

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From the desk of Ashley Robotti – Director, CommLoan, LLC

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Dear Client

 

This presentation is meant to explain your options and our role in financing your selected commercial property, as a refinance or a new acquisition, helping you make informed decisions about your financing options. We're committed to transparency and ensuring you understand every aspect of the lending process.

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The CommLoan Advantage: We have a wide lender network. We provide access to an extensive network of commercial lenders, each offering unique terms, rates, and structures. This diversity ensures you're not limited to a single lender's constraints. Our relationships span regional banks, national institutions, credit unions, life insurance companies, and private debt funds.

Here is the Process: We introduce multiple lender options early in your loan process through 77giving you time to evaluate and compare before committing.

Customized Matching: We take time to understand your unique preferences, risk tolerance, and investment goals to match you with ideal lenders.

Expert Negotiation: Our experienced team negotiates on your behalf to secure favorable terms on prepayment penalties, rate adjustments, and other loan features.

Recourse vs. Non-Recourse Financing: Most commercial lenders base initial quotes on recourse financing, where borrowers provide personal guarantees. Recourse loans typically offer more competitive interest rates due to reduced lender risk. Non-recourse options may be negotiable, particularly with conservative LTV ratios like 50% or lower.

Strategic Timing: These discussions are most productive after submitting a complete borrower package and creating competitive tension among lenders.

Leverage as Negotiating Power: Your loan-to-value ratio significantly impacts your negotiating leverage with lenders. Lower LTV ratios demonstrate stronger equity positions and reduced lender risk. At 50% LTV, a borrower has a substantial equity cushion, making lenders more amenable to favorable terms, including non-recourse structures, reduced prepayment penalties, and better interest rates. This conservative leverage approach opens doors for negotiations that might be closed at higher LTV levels.

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Here's how we work together to secure your optimal financing solution: Our Collaborative Process: Success in commercial lending requires a strategic, well-coordinated approach.

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Initial Consultation: We suggest that we schedule a call soon to discuss your financing needs, property details, investment goals, and preferences on terms like recourse/non-recourse.

Document Assembly: We have begun to compile a comprehensive borrower package including financials, property information, and business plan and potential property acquisitions.

Lender Presentation: You choose 3-4 lenders then we submit your package to the lenders simultaneously, creating competitive dynamics that favor borrowers.

Term Negotiation: With competing offers in hand, we negotiate prepayment terms, rate structures, and recourse options on your behalf.

Final Selection: You choose the lender that best aligns with your needs, backed by our expert analysis and recommendations. This systematic approach ensures you benefit from market competition while having expert guidance at every decision point. Our goal is to demystify the commercial lending process and empower you with knowledge and options.

Next Steps Forward: We hope this comprehensive overview clarifies the commercial lending landscape and demonstrates how CommLoan's approach benefits you throughout the financing process. Our commitment is to provide transparency, expert guidance, and access to competitive lending options that align with your investment objectives.

Schedule a Consultation: Let's discuss your specific financing needs and explore which lenders and loan structures best match your goals. We will complete the loan packaging and submit to selected lenders. We will then negotiate and present detailed quotes from multiple lenders with clear explanations of terms, penalties, and adjustment mechanisms.

Secure Your Financing: Together, we'll negotiate optimal terms and guide you through closing to ensure a smooth transaction.

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Our Brokerage Fee Structure - Transparent Pricing: All quotes provided include a mortgage brokerage fee to CommLoan. This fee covers our comprehensive services, including lender negotiations, application processing, and deal structuring to secure the most favorable terms for your commercial loan. Our brokerage fee is competitive within the industry and reflects the value we bring through our extensive lender network and expertise in commercial financing.

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Prepayment Penalties Explained: Prepayment penalties are fees charged if you pay off your loan before the scheduled maturity date. These penalties protect lenders from losing anticipated interest income when borrowers refinance or sell properties early. Lender-Specific Formulas: Each lender maintains their own internal calculation methods for

prepayment penalties, ranging from fixed percentages to yield maintenance formulas. Negotiable Terms: These penalties often become key negotiating points between brokers and lenders, especially for strong borrower profiles.

Rate Adjustment Mechanisms: After your fixed-rate period expires, your loan rate will adjust according to the lender's chosen index. Understanding these adjustments is crucial for long-term financial planning, but, until we choose 3-4 lenders, we cannot predict any particular requirements. Variable Index Options: Lenders may use SOFR, Prime Rate, Treasury rates, or proprietary indexes. Each has different volatility characteristics and historical performance. The specific index will be made clear, once we select the group of potential lenders Rate Caps: Most loans include periodic and lifetime caps that limit how much your rate can increase (after the fixed term), providing payment predictability.

Margin Considerations: The lender's margin added to the index determines your final rate. This margin

is typically negotiable through our team, during loan origination. Here’s a scenario of choosing four lenders: Four different lenders can present four completely different adjustment formulas, prepayment structures, and pricing models for the same property and borrower profile.

Lender A: Uses 5-year Treasury + 2.5% margin with a 3-year prepayment penalty declining yearly from 3% to 1%.

Lender B: Uses SOFR + 2.75% margin with yield maintenance prepayment penalty for first 5 years.

Lender C: Uses Prime Rate + 1.5% margin with step-down prepayment penalty (5-4-3-2-1%) over 5 years.

Lender D: Uses proprietary index + 2% margin with defeasance option instead of traditional penalties.

This diversity demonstrates why having access to multiple lenders provides significant advantages in securing optimal financing terms tailored to your specific investment strategy.

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"Thank you for considering CommLoan as your commercial lending partner. We're here to answer

questions, provide clarity, and help you make confident financing decisions."

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Ashley Robotti, Director, Comm Loan

CEO< NextGen CRE Solutions, LLC