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Frequently Asked Questions
Loan Programs
- What are Capital Development's basic program terms?
- What are Capital Development's credit score requirements?
- What are Capital Development's minimum and maximum loan amounts?
- What loan types does Capital Development offer?
- Does Capital Development do blanket mortgages?
- Where do I find the Capital Development's rate sheet?
Property Types
- What property types does Capital Development fund?
- What is a Special-Use Property?
- What is an investment property?
- What is an owner-occupied commercial property?
- Is the underwriting different if it is owner occupied?
Loan Submission
- What forms do I need to start submitting deals to Capital Development?
- Does the Pre-Approval Letter (PAL) include all the loan terms and estimated costs?
- Who pulls the credit report?
Appraisals, Title, Environmental
- Will Capital Development accept an existing appraisal?
- Is the appraisal fee refundable if the value isn't there?
- How does the appraisal process work?
- Can I engage my own appraiser?
- Do you require an MAI appraiser?
- Can I get my own appraisal bid?
- Will I receive a copy of the appraisal report?
- Who orders the title policy?
- What if the title is already in process?
- Does Capital Development require automatic payments?
- Does Capital Development require an environmental report?
Borrowers, OCs, EPCs
- Do all loans require a personal guaranty?
- Who will have to sign on the loan?
- What is an OC?
- What is an EPC?
- What are your insurance requirements?
- What is an "Affiliate"?
- Who should sign a 4506-T Form?
CDCs
Closing
Loan Programs
What are Capital Development's basic program terms?
| Coverage | Nationwide |
| Property Types | Multifamily |
| Terms | Amortization typically 25 to 30 years. Most loan programs are fully-amortizing. |
| Loan Programs | 10-year fixed |
| Loan Purposes | Purchase |
| Loan Sizes | $250,000 to $15,000,000 |
| Loan Pricing | Varies by loan program |
What are Capital Development'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 620).
What are Capital Development's minimum and maximum loan
amounts?
Commercial real estate loan from $250,000 to $15,000,000.
What loan types does Capital Development offer? Capital Development offers fully-amortizing loans, as well as, several term options:
- 10-year Fixed
- 7-year fixed
- 5-year Fixed
- 3-year fixed
- 2-year fixed
- 1-year fixed
- Variable
Does Capital Development 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 Capital Development's
rate sheet?
Wholesale Rate Sheets are available to mortgage professionals. To begin receiving
Wholesale Rate Sheets, register now as a Wholesale
Broker.
Property Types
What property types does Capital Development
fund?
We fund most commercial property types including multi-use (office, retail,
industrial, warehouse), multifamily (minimum 5 units), special-use and hospitality.
We typically avoid gas stations.
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, hospitality, assisted living and self-storage.
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%.
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.
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.
Loan Submission
What forms do I need to start submitting
deals to Capital Development?
Docs required for preliminary review*:
- 3 Years Business Tax Returns
- Current Business Interim Financials
- 3 years operating statements
- Business Debt Schedule
- 3 Years Personal Tax Returns
- Credit Authorization
- Current Personal Financial Statement
- Property Info (description of property, pictures, copy of appraisal, etc.)
- Rent Roll
- Resume of property manager and borrower
*additional docs will be requested for preliminary review of start-up business or construction project
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.
Who pulls the credit report?
You may submit a current tri-merge credit report with the preliminary loan
package. Upon final underwriting, Capital Development will pull an additional
one.
Appraisal, Title, Environmental
Will Capital Development 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, Capital Development will determine what options are
available to make the deal work.
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.
Can I engage my own appraiser?
No. All 3rd Party Reports, including the appraisal, must be engaged by Capital
Development in conjunction with our requirements. Capital Development 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.
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.
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.
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.
Who orders the title policy?
Capital Development 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.
What if the title is already in process?
We will work with you to help ensure there are no problems.
Does Capital Development require automatic
payments?
Varies by loan program. Loans with credit issues, however, may have a requirement for
ACH automatic payment.
Does Capital Development 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.
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.
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.
What is an OC?
The OC is the Operating Company, which is a business owned by the borrower
that will occupy the property.
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.
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).
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.
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.
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.
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.
Closing
How long does it take to close a commercial loan?
Timeframes may 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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