This document discusses various potential "curveballs" or unexpected issues that may arise during the commercial loan application process. It outlines steps borrowers can take to prepare for and address common curveballs regarding business plans, financial projections, collateral valuations, personal financials of owners, environmental reviews, appraisals, title work, insurance requirements and more. Being aware of these potential hurdles and communicating proactively with lenders can help smooth out the process and increase the chances of a successful loan closing.

1. ANTICIPATING
CURVEBALLS
IN THE
COMMERCIAL
LOAN PROCESS
DAN HENNEN | VISIONBANK

2. BASEBALL CURVEBALL
• a pitch delivered with a spin that causes the
ball to veer from anormal straight path, away
from the side from which it was thrown.
BANKING CURVEBALL
• a situation that a potential borrower faces
within a pending loan application that causes a
delay in processing and loan closing.

3. ON DECK…GETTING PREPARED
• Business Plan
• Business Historical Financials & Projections
• Collateral initial valuation
• Ownership’s Personal Financial Review
• Professional Consultations
• Accountant
• Attorney
• Insurance Agent
• Contractors, Engineers, etc.
• Required Closing Date?

4. SELECTING THE RIGHT MANAGER-BALLPARK /
LENDER-BANK
• Quality of Bank
• Lending Limit of Bank (Community Banks)
• Loan Type Familiarity
• Loan Programs Offered (Small Business Administration
(SBA)/State/Municipal)
• Typical Fees, Interest Rate Range, Expected Terms
• Lender Approval Authority – Loan Committee
• Underwriting Process / Underwriting Standards
• Relationship Requirements (Deposit Accounts, etc.)
REVIEW DIFFERENT BANK OPTIONS

5. FINANCIAL CURVEBALLS
• Overstated financial projections compared to industry averages
• Review projections along with lender
• Explain how your business plans to beat the industry averages by certain advantages
• What is the minimum performance needed to cash flow the requested loan?
• Applied term/rate adjustments?
• Distributions – Are they needed? Lower them? Add a covenant with loan?
• Company has too much short-term debt / long-term debt
• Refinance options?
• Accounts receivable collection issues? Internal/external company problems?
• Financials do not reconcile with the last prepared tax return
• Review interim financials with accountant

6. COLLATERAL CURVEBALLS
• Professional appraisals
• Ensure initial report is completed by competent appraiser
• Review for accuracy of comparable market sales
• Appraisal adjustments may be subjective…
• Did the evaluator reach out to an area expert(s)?
• Bank ordered report can be used by all banks
• Internal bank review of collateral
• Provide researched comparable sold property during initial loan request
• Ask to review the internal evaluation
• Cross collateralize?
• Larger down-payment?

7. PERSONAL GUARANTY CURVEBALLS
• Individual has too much short-term debt / long-term debt
• Refinance options?
• Credit score(s) -- too low
• Review personal credit reports prior to loan application for inaccuracies
• Share credit scores with lender at initial consultation
• Letter of explanation of negatives
• Need completed personal tax return from last tax year
• Additional guarantor(s) for loan?

8. OTHER REAL ESTATE CURVEBALLS
• Real Estate
• Appraisal timing
• Environmental timing
• Early identification of environmental concerns for property (Phase 1 Transaction Screen)
• Obtain early quote for full Phase 1, include additional phases as recommended
• Remediation cost estimates?
• Municipal approvals required? Prior to appraisal?
• Title work issues & timing
• Owners & Encumbrance Report
• Obtain early title quote

9. LIFE INSURANCE CURVEBALL
• Key man insurance coverage
• Important for SBA Loans
• Assignment to bank
• Seek from start…

10. TIMING…TIMING…TIMING
• Establish timeframe with lender from start!
• Prior to purchase agreement…if possible

11. PURCHASE AGREEMENT CURVEBALL
• Seek/discuss extension possibilities sooner than later

12. LOAN DECLINED - STRIKEOUT
• Discussion with lender to understand reason(s)
• Recommended adjustments?
• Risk Rating?
• 1-2 Great / 3 Good / 4 fair | 5 possible? Watch Loan
• Due to operator issues?
• Risk mitigation

13. START AGAIN – NEW GAME
• Keep in mind –
• Relationship is there to try again after
remediation
• 2nd / 3rd opportunities sometimes are better than
the 1st

14. LOAN APPROVED – AFTER CLOSING CURVEBALL
• Compare approvals
• Negotiate after approval? What?
• Loan increase – higher actual costs
• Pre-payment penalties?
• 3-2-1 / Negotiate – 3-2? 2-1?
• If refinanced?
• Future support?
• Review loan documents prior to closing

15. QUESTIONS???