How to Secure a Commercial Real Estate Loan for Your US, Caribbean, or Latin American Project

Securing project financing, especially for Caribbean and Latin American ventures, can be challenging. Many developers mistakenly believe that simply having a project idea or owning land is sufficient to attract millions in capital without any cash in hand. This misconception can hinder their ability to secure necessary funding.

According to officials at Invest Caribbean, a clear path to securing millions in capital for commercial real estate projects exists, but it requires meeting specific criteria. Here’s a detailed guide to help project developers secure funding in today’s economic environment:

1. Legitimate Business and Qualified Team

Ensure you are a legitimate, registered business with a qualified team. If your plan is to build villas or a hotel, your team should have expertise in these areas. Investors want to see that you can execute your project.

2. Comprehensive Business Plan and Financial Projections

Prepare an attractive and concise business plan with clear five-year financial projections, including actual construction costs. Be clear about the specific use of the funds you are seeking. If you plan to buy land for future development, include projections for the entire project and all associated costs.

3. Professional Pitch Deck

Invest in a professional pitch deck no longer than 10 pages that encapsulates the entire project and financials, including ROI. Make it easy for investors to find details.

4. Land Appraisal and Value

If you’re buying land, know its appraised value, as loans will be pegged against this hard asset. The same applies if you are expanding a commercial real estate property. Lenders typically lend up to 65-70% of the appraised value, with some going up to 90% LTV. They will also consider the finished projected value.

5. Personal Investment and Third-Party Costs

You must have some money to invest in the development. Lenders require a percentage of the loan amount as a down payment on the land or property. You also need funds for third-party costs like fundraising fees, inspections, appraisals, and legal fees. Some lenders may cover closing costs and broker fees, but others will expect you to cover these costs.

6. Review of Personal and Corporate Financials

Lenders will review your personal and corporate financials, usually for at least three years. This step is similar to securing a mortgage for a house.

7. Exit Strategy Narrative

You may be asked to provide a precise exit strategy narrative, which you can write yourself or have your broker do it for you.

8. Application Form and Documentation

Complete an application form and submit all required documentation, including financials and project overviews.

9. Letter of Intent and Third-Party Fees

After review, a Letter of Intent will outline the general terms. Upon signing, you must pay for third-party fees such as inspections and appraisals.

10. Appraisal and Inspection Process

An independent inspector will appraise the land or property. You might be responsible for the travel and accommodation of the inspector if they are not local.

11. Collecting Documents for Underwriting

Collect all documents for underwriting as listed in the Letter of Intent. This includes everything discussed earlier and colored copies of two modes of identification.

12. Underwriting and Final Approval

Submit the appraisal report and all documents to the lender's underwriting department. Approval to closing can take 30-45 days or longer, depending on the lender.

13. Closing the Loan

At closing, the lender will pay the lawyer and broker, retain some money in escrow, deduct the first year’s interest, and then release the remaining loan amount for your project.

Connect with Invest Caribbean to start raising capital for your commercial real estate project if you meet these parameters.