Commercial Real Estate Loan Broker: What Happens Step by Step

A commercial real estate loan broker takes your property and financial details, packages them, takes them to lenders that fit the deal, and manages the file until closing.

Key points

• Before you share documents, ask the broker whom they represent in the deal and how they are paid, and get both in writing.
• Your documents are the part of the timeline you control. A current rent roll and clean operating statements keep the file moving.
• No honest broker can promise approval, a rate or a closing date. Be wary of anyone who does.

What does a commercial real estate loan broker actually do?

A broker does not lend. A lender funds the loan with its own money or capital, while a broker can show your deal to several of those sources instead of one.

Northern Ridge Capital works on loans from $5M to $30M. Ask any broker what range they work in.

What are the steps when you work with a commercial real estate loan broker?

1. Intake call. You describe the property, your plan, the loan you need and when you need it.
2. Fit check. The broker gives you a preliminary financing assessment of how the deal is likely to look to lenders and what could get in the way. It is subject to each lender's own underwriting.
3. Document collection. You send the property and ownership paperwork.
4. Loan package. The broker organizes your documents and writes a summary of the deal.
5. Lender outreach. The package goes to the lenders that fit, and you get their responses.
6. Term sheets and choice. You compare offers and pick one, looking past the rate to your cash and flexibility:
7. Net proceeds. The loan amount minus fees, withheld reserves and closing costs. On a refinance, that money pays off your existing loan first, and what remains is your cash. On a purchase, you fund the gap between those proceeds and the total cost to acquire.
8. Reserves. Money set aside for taxes, insurance, repairs or interest. Some you fund in cash at closing. Others the lender withholds from the loan, which lowers your proceeds instead.
9. Recourse. Whether you personally guarantee the loan, and for what.
10. Prepayment terms. What it costs to pay off early, which limits when you can sell or refinance.
11. Extension conditions. For a bridge loan, the tests and fees to extend if your plan runs long.
12. Third-party reports. The lender orders an appraisal and other reports.
13. Underwriting and closing. The lender finalizes its review, lawyers prepare documents and the loan funds.

What should you have ready, and when?

For the first call

• The property type and location
• The loan amount you need and your financing deadline
• What the loan is for (purchase, refinance, renovation, bridge to a later loan)
• The existing loan balance and maturity date, if you are refinancing

After the fit discussion

Once the deal looks like a fit, the broker asks for the full package:

• A current rent roll (every tenant or unit, rent, lease dates)
• Operating statements for the past few years, with the most recent year in detail
• Copies of leases, especially for commercial tenants
• Property tax and insurance bills
• A personal financial statement for each owner or guarantor
• A schedule of other real estate you own and the debt on it
• Entity documents showing who owns the property
• Recent tax returns
• A plain description of any work planned and what it will cost

The FDIC's commercial real estate lending examination procedures tell examiners to confirm loan files hold borrower or project operating statements, tax returns, rent rolls, guarantees and appraisals. Other lender types set their own rules, but the same questions come up.

How do you track timing at each stage?

Timing depends on the property, the lender and how quickly you and your third parties respond, so plan by milestones. Each handoff has a deliverable, an owner and a usual blocker:

At each handoff, ask your broker for a target date for the next deliverable in the table, and for a revised date whenever a lender asks for something new.

If your existing loan matures soon, tell the broker at the start. A fixed deadline changes which lenders and loan types make sense. Our post on commercial property refinance or bridge loan explains how to tell which one you need.

Do you need an appraisal on a commercial loan?

At this size, plan on one. The federal appraisal rule lets a bank skip a full appraisal on commercial real estate transactions of $500,000 or less, and that is not the only exemption. The interagency appraisal guidelines also "permit an evaluation for a renewal or refinancing of an existing extension of credit at the institution" when set conditions are met. For the size test, transaction value for loans is "the amount of the loan or extension of credit," not the property's value. Ask your lender early whether any exemption applies to your deal.

Before reports are ordered, confirm three things with your broker and lender:

• Scope. Which reports the lender requires and what each one covers.
• Who orders them. The guidelines say "An institution or its agent must directly select and engage appraisers," and a federally regulated bank cannot use an appraisal you ordered yourself.
• Payment. What you pay, and whether it is due up front or at closing.

What should you ask a broker before you sign anything?

• Do you work on loans of my size and property type?
• How and when are you paid, and is it spelled out in writing?
• Will you tell me which lender types you plan to approach, and why?

If a bridge loan is part of the plan, read our explainer on how a bridge loan works first so the broker's terms make sense.

The first step with any commercial real estate loan broker is a short fit discussion. To start one, contact Northern Ridge Capital's commercial mortgage broker team with four things ready: the property type, its location, the loan amount you need and your financing deadline. You'll hear whether the deal is in range, which loan types could fit and what documents come next.

FAQ

Does a commercial real estate loan broker charge the borrower?

Northern Ridge Capital is paid a 1% origination fee at closing. With any broker, get the fee and who pays it in writing before you share documents.

Is a broker better than going straight to my bank?

Your bank is one source. A broker can show the deal to more than one, which helps when your bank says no or offers terms you do not like. If your bank already fits your deal well, you may not need one.

Will a broker guarantee I get approved?

No. Only the lender decides, after reviewing your property, your finances and its own reports. Any promise of approval before that is a red flag.

Can I change lenders partway through?

It depends on what you signed. A term sheet is generally nonbinding, while a commitment letter can bind the lender to the stated terms and may require you to cover the lender's expenses, pay a break-up fee or stop shopping other lenders (see this explainer on term sheets and commitment letters). Read the deposit, fee and exclusivity terms before you sign either one.