Lending for a Commercial Project

A Q&A with Bruce Whited

JEDCO Board Member and Vice President at Bank Iowa

When considering a commercial project, at what point should an individual speak to a lender regarding financing?

The sooner the better. There are plenty of items to consider when financing a project, and the sooner you can align the borrower’s expectations and the bank’s expectations, the better.

What questions and documents should an individual prepare for an initial meeting with a commercial lender?

The borrower should be ready to discuss how the borrowing entity will be organized, what the ownership structure will look like, detailed cost estimates for the project and proposed cash equity available, as well as any cash reserves to weather any unseen slowdowns or overruns. If the project has a construction or
development component, then feasibility studies, current/projected absorption rates, and any environmental concerns will be brought up.

If the request is on an existing project, then historical financials on the borrower, guarantors and project will be reviewed, as well as projections.

What other parties should an individual involve to ensure a smooth lending process?

It is highly recommended to have an independent accountant, independent counsel and an independent engineering/design (construction/development) firm engaged early on to help the borrower navigate any unforeseen hurdles.

How long is the typical process for securing a commercial loan?

The time line varies depending on the size and complexity of the request. The larger and more complex a project is, the longer the lead time will be. Communication and responsiveness also play a big role in turnaround time.

What role, if any, does a commercial lender play in local government incentive programs?

Lenders can provide the needed borrower financing to make these projects possible if it is determined to be a good fit for the borrower, the bank and the community as a whole.