Tips for Closing Commercial Loans

Commercial loans can be used to finance the expansion of a business. The expansion of a business can be in the form of the acquisition of another business, hiring additional employees or investing in the necessary technology and equipment necessary for the business to grow and continue to prosper.

A business that qualifies for a commercial loan provided by a commercial bank or other lender has completed the initial application process and is in position to close the loan and receive the loan proceeds. Closing a commercial loan usually requires the signing of the loan agreement and the inclusion of any additional terms and conditions discussed by the lender with the borrower in order to put the loan in place. When closing a commercial loan, a business should be prepared to provide any additional supporting documents for the lender’s files as well as any fees or deposits that may be required.

Financial and Tax Statements

A commercial loan lender may require additional financial or tax statements from the business, to be brought at the time of loan closing. These documents would reflect any changes in the business’s financial position since the loan was first applied for as well as verify the financial position of the business. The types of documents that may be required include any corporate tax returns, bank statements and audited financial statements prepared on either a quarterly or an annual basis.

Upfront Origination and Activation Fees

In addition to any financial data that may be required at loan closing, a lender may require a check in the amount of any fees that were charged for the loan. This can include an origination or activation fee that the lender charges for a new borrower that was not a previous customer of the lender. These fees are typically deducted from the amount of the loan but in some a few cases may be required as a good faith demonstration on part of the borrower. All questions concerning these types of upfront fees should be raised by the borrower with the lender prior to the closing of the commercial loan.

Understand the Loan Agreement

A borrower should read the loan agreement. Borrowers that fail to fully understand the terms and conditions of the agreement may find themselves in a perilous situation later , it is better for a borrower to delay the closing of the commercial loan in order to better understand the contract, than  to sign unclear documentation.