Commercial Loan Closing Timeline Overview
Commercial real estate loans take longer to close than residential mortgages due to more complex underwriting and due diligence requirements. Understanding the commercial lending process will help you prepare.
Typical Timelines by Loan Type
| Loan Type | Typical Timeline |
|---|---|
| Bridge Loans | 5-21 days |
| Hard Money | 7-14 days |
| Bank Loans | 45-90 days |
| SBA 504 | 60-90 days |
| SBA 7(a) | 45-75 days |
| Agency (Fannie/Freddie) | 45-60 days |
| CMBS/Conduit | 60-90 days |
| Construction | 60-120 days |
The Commercial Loan Process: Step by Step
Phase 1: Application & Initial Review (Days 1-7)
What happens:
- Submit loan application and initial documents
- Lender reviews deal at high level
- Initial term sheet or quote issued
Your responsibilities:
- Complete application thoroughly
- Provide rent roll, operating statements, purchase contract
- Respond quickly to initial questions
Phase 2: Term Sheet & Commitment (Days 7-14)
What happens:
- Review and negotiate term sheet
- Sign term sheet (may include deposit)
- Lender begins formal underwriting
Key terms to review:
- Interest rate and index
- Loan amount and LTV
- Fees (origination, exit, legal)
- Prepayment terms
- Reserve requirements
- Recourse/non-recourse
- Rate lock terms
Phase 3: Due Diligence & Underwriting (Days 14-45)
Lender activities:
- Order and review appraisal
- Order environmental report (Phase I)
- Property condition assessment
- Credit and background checks
- Financial analysis and stress testing
- Legal review
Third-party reports required:
- Appraisal: $3,000-$10,000+ depending on property
- Phase I Environmental: $2,000-$4,000
- Property Condition Report: $2,500-$5,000
- Survey: $2,000-$5,000 (if required)
- Zoning Report: $500-$1,500
Your responsibilities:
- Provide all requested documents promptly
- Facilitate property access for inspections
- Respond to underwriter questions
- Address any issues that arise
Phase 4: Loan Approval & Commitment (Days 35-50)
What happens:
- Underwriter completes analysis
- Loan goes to credit committee
- Formal commitment letter issued
- Rate lock (if applicable)
Commitment letter includes:
- Final loan terms
- All conditions to closing
- Required documents
- Closing timeline
Phase 5: Legal & Closing Preparation (Days 45-60)
What happens:
- Lender's counsel prepares loan documents
- Borrower's counsel reviews documents
- Title insurance ordered
- Insurance requirements finalized
- Escrow/closing scheduled
Key documents:
- Promissory note
- Mortgage/deed of trust
- Loan agreement
- Guaranty (if applicable)
- Environmental indemnity
- Assignment of leases and rents
- UCC financing statements
Phase 6: Closing (Day 60+)
At closing:
- Sign all loan documents
- Fund closing costs and reserves
- Title company records mortgage
- Funds disbursed
Typical closing costs (% of loan):
- Origination fee: 0.5-2%
- Legal fees: $10,000-$25,000+
- Title insurance: 0.25-0.5%
- Third-party reports: $10,000-$25,000
- Recording fees: varies
- Reserves: 6-12 months PITI
Common Causes of Delays
Appraisal Issues
- Value comes in lower than expected
- Appraiser identifies deferred maintenance
- Comparable sales don't support value
Solution: Order early, provide comps to appraiser, address issues proactively
Environmental Concerns
- Phase I identifies RECs (Recognized Environmental Conditions)
- Phase II testing required
- Remediation needed
Solution: Review seller's Phase I before contract, budget for Phase II if needed
Title Issues
- Liens or encumbrances
- Survey discrepancies
- Easement conflicts
Solution: Order title early, work with title company to resolve
Document Delays
- Missing or incomplete financials
- Tenant estoppels not returned
- Entity documentation incomplete
Solution: Start document collection immediately, follow up persistently
Borrower Issues
- Credit issues discovered
- Net worth or liquidity shortfall
- Experience concerns
Solution: Disclose issues upfront, address before formal application
How to Ensure a Smooth Closing
- Choose the right loan product for your timeline
- Prepare documents before you need them
- Respond quickly to all lender requests
- Maintain open communication with lender and broker
- Have adequate reserves for unexpected costs
- Hire experienced professionals (attorney, title company)
- Build in buffer time to your purchase contract
Questions to Ask Your Lender
- What is your realistic timeline to close?
- What are all the conditions to closing?
- What third-party reports are required?
- When can I lock my rate?
- What could cause delays?
- Who is my primary contact during the process?
Ready to Start the Process?
Understanding the timeline helps you plan effectively. Contact us to discuss your deal and get a realistic closing timeline based on your specific situation.
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