What are DCF’s credit score requirements? Underwriting includes review of the borrower’s history at repaying other debts. Thus, credit scores are an integral part of our programs. Higher credit scores allow better rates and/or higher loan-to-value ratios while lower scores may impact the borrower’s ability to obtain financing. We prefer scores above 680 but will review requests with lower scores (minimum 650).
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What are DCF’s minimum and maximum loan amounts? Commercial real estate loan from $250,000 to $100 Billion.
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What loan types does DCF offer? This varies by property type but DCF offers fully-amortizing loans, as well as several term options:
10-year Fixed
7-year fixed
5-year Fixed
3-year fixed
1-year fixed
Variable
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Does DCF do blanket mortgages? We prefer to finance each property separately, however, we will consider blanket mortgages on a case-by-case basis. We do not cross-collateralize with residential property such as a primary residence.
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Where do I find the DCF’s rate sheet? Wholesale Rate Sheets are available to mortgage professionals. To begin receiving
Wholesale Rate Sheets, register now as a Wholesale Broker.
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PROPERTY TYPES
What property types does DCF fund? We fund most commercial property types including Multi-use (office, retail, industrial, warehouse), Multifamily (minimum 5 units), Special-use. We typically avoid Gas stations and Churches.
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What is a Special-Use Property? Special-use is commonly associated with properties that are either designed for a particular type of tenant, or are modified for use by a particular type of tenant. They are not suitable for multi-use (use by a wide variety of tenants such as an office, retail or industrial building). The modifications are significant enough that future users of the property would have to incur significant costs for conversion to their use. Examples of special-use include automotive repair (if pits or other permanent modifications made to property), car wash, restaurant, night club, event center, funeral home, assisted living and self-storage.
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What is an investment property? A property would be considered as an investment if it is 100% leased to tenants that are unrelated to the owner, or the owner’s business occupies <50%.
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What is an owner-occupied commercial property? In commercial real estate, owner occupied (also known as owner-user) is defined as a property that is at least 51% occupied by a business owned by the principals/guarantors. Please note that in order to qualify for SBA financing, the business must occupy at least 51% of an existing property or 60% of a new construction project.
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Is the underwriting different if it is owner occupied? Yes. The underwriting for owner occupied properties gives primary consideration to the cashflow of the owner’s business. Investment properties are underwritten based upon the lease income and expenses of the property, as well as, underwriting factors such as vacancy, management and reserves. Secondary consideration may be given to outside sources of income, but the business or property should still demonstrate sufficient strength and cashflow.
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LOAN SUBMISSION
What forms do I need to start submitting deals to DCF?
Docs required for preliminary review*:
CD Loan Application (signed)
3 Years Business Tax Returns
3 Years Personal Tax Returns
Property Tax Returns (Investment property)
Current Business Interim Financials
Current Personal Financial Statement
Property Info (description of property, pictures, copy of appraisal, etc.)
Rent Roll (Investment property)
Personal Credit Report (if available)
*additional docs will be requested for preliminary review of start-up business or construction project
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Does the Pre-Approval Letter (PAL) include all the loan terms and estimated costs? Yes. The PAL provides details of the transaction including the estimated costs.
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Who pulls the credit report? You may submit a current tri-merge credit report with the preliminary loan package. Upon final underwriting, DCF will pull an additional one.
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CDCs
What is a CDC? A CDC is a Certified Development Company that is authorized to do business with the Small Business Administration (SBA). CDC involvement is required on all SBA 504 loan requests.
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How do I find a CDC? On an SBA 504 transaction, we will locate an experienced CDC and have them contact you to expedite the SBA application process.
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APPRAISALS, TITLE, ENVIRONMENTAL
Will DCF accept an existing appraisal? Existing appraisals are generally not accepted due to their age or scope of the report (such as being prepared for the borrower instead of a lender). If the appraisal was completed within the last six months, the report should be submitted for our review. We try to keep borrower costs to a minimum and we generally will accept a current appraisal of good quality.
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Is the appraisal fee refundable if the value isn’t there? No, the fee is not refundable as the report is performed by a third party. If the value isn’t there, DCF will determine what options are available to make the deal work.
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How does the appraisal process work? After we receive a signed Pre-approval Letter (PAL) from the borrower and the required Expense Deposit, we will engage the appraiser. The appraisal generally takes 3 to 4 weeks to complete their report. The loan should close within 10 business days thereafter.
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Can I engage my own appraiser? No. All 3rd Party Reports, including the appraisal, must be engaged by DCF in conjunction with our requirements. DCF has a preference for national firms and has found that even though an appraisal prepared by smaller operators may cost less, the quality of the report may present problems that interfere with the ability to close the loan. Issues we have experienced with smaller operators include excessive use of Extraordinary Assumptions, lack of supporting information provided for appraiser’s assumptions, excessive adjustments to comparables and lack of market information.
If you have an appraiser that would like to be approved for use in our lending programs, please have them contact us. We will request information from the appraiser to determine if they meet our experience and reporting requirements.
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Do you require an MAI appraiser? An MAI is preferred, but not necessarily required. We will also take into consideration the appraiser’s experience and quality of their reports.
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Can I get my own appraisal bid? We are required to contact our own appraisers for bids as the cost is related to the job requirements and type of report needed.
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Will I receive a copy of the appraisal report? Yes. Copies of all the third party reports, including the appraisal report, will be provided to the borrower at the time of closing or shortly thereafter.
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Who orders the title policy? DCF prefers to order title because it enables us to manage the deal and keep the process moving. We have relationships with title companies who understand the endorsements we require and are responsive to our needs.
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What if the title is already in process? We will work with you to help ensure there are no problems.
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Does DCF require automatic payments? Varies by loan program. Loans with credit issues, however, may have a requirement for ACH automatic payment.
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Does DCF require an environmental report? We typically require a Phase 1 environmental report but the requirement varies by loan program and transaction type. In some cases, we are able to use a less expensive report, such as a Transaction Screen.
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BORROWERS, OCs, EPCs
Do all loans require a personal guaranty? Personal guaranty is preferred but we may consider limited or non-recourse on a case-by-case basis for stronger quality loans and properties.
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Who will have to sign on the loan? Any Operating Company (OC) and/or Eligible Passive Company (EPC) involved in the transaction will be required to provide its authorized signature. Most of our loan programs require full recourse to the principals (defined as owning a minimum of 15-20%). In cases where there is a minority partner providing the majority of capital for the project, the minority partner may be required to provide their guaranty too. We may consider on a case-by-case basis a non-recourse or limited recourse request for stronger loan requests with lower loan-to-value ratios. The principal’s financial and credit information would still be required for review on a non-recourse or limited recourse request.
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What is an OC? The OC is the Operating Company, which is a business owned by the borrower that will occupy the property.
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What is an EPC? EPC is the Eligible Passive Company that will hold title to the real estate and collect rent from the OC and other tenants (as applicable). An EPC should be a single asset entity.
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What are your insurance requirements? With most of our loan programs, we require fire, lighting and extended coverage insurance for the maximum insurable amount on the referenced real property. Additional requirements may apply on a case by case basis, depending upon the selected loan program. Full Replacement Cost Value for SBA loans is required. Evidence of insurance should be provided by the agent on ACORD 27 (or comparable form).
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What is an “Affiliate”? An affiliate is any business entity owned by the Borrower or Guarantor that is not involved in the transaction. Financial information, such as tax returns and financial statements, should be provided for any affiliate along with a breakdown of ownership.
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Who should sign a 4506-T Form? The 4506-T authorizes us to obtain a copy of a tax transcript from the IRS. We require the 4506-T for business entities involved in the transaction including the OC and EPC. In the case of a sole proprietorship, the individual should complete a 4506-T.
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CLOSING
How long does it take to close a commercial loan? Timeframes vary depending on the loan program selected and the degree of cooperation from the Borrower in providing the required documents. Also keep in mind that the appraisal report will typically take 3 to 4 weeks to complete. A typical conventional loan may close in about 30 days if all requested documentation is provided within 10 business days of pre-approval. Construction and/or SBA 504 loan requests are a minimum of 45 days.
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