When you meet with potential lenders to discuss financing for a construction or development project, what kind of information and documents should you provide to put yourself and your project in the best possible light? Although every plan is unique, you’ll want to be familiar with a basic checklist of information that’s commonly expected for all projects. The right collection of details and documents can tell lenders what they want to know about you and your project plans.

Show your character, credit, and capacity
According to Kenneth Spatz, vice president of Mercantile-Safe Deposit and Trust Company, Lebanon, PA, potential lenders first want to learn about the character, credit, and capacity of the borrower: “Will they willingly repay the loan? Do they have a history of repaying on time? Do they have the ability to repay?” If you’re comfortable with those three things as a lender, says Spatz, “then you’re likely to make the loan.”

To satisfy these questions, “you need to bring a minimum of three years business financial statements or tax returns prepared by an outside accountant,” says Spatz. “Some banks ask for five years.” For first-time borrowers and certain projects, you’ll also need a personal financial statement plus three to five years of personal tax returns.

Also bring a description of the project’s ownership type—proprietor, partnership, corporation, LLC, or some other arrangement.

If you have any experience in development and construction, whether projects in progress or completed, bring a description of these as well, says Charles Simms, Jr., senior vice president of commercial real estate for Bank of Lancaster County, Lancaster, PA.

Lenders also want to know that you’re engaging the appropriate professionals, says Jim Wagner, senior vice president for corporate real estate at Fulton Bank, Lancaster, PA. So provide a list with names and addresses of your attorney, accountant, contractor, and any other consultants.

Provide a project overview
Present a complete summary of the project itself: a written description, plans and specs, the status of government approvals, and the construction contract.

First, in writing “describe briefly what this project is all about,” says Spatz. This should include the business type and its clientele; the building’s size by square feet of floor space, stories, footprint, and height; and particulars about the site’s location, including property address, lot size, and zoning. Also include a complete set of professionally prepared project plans and specs along with site photographs.

And, if you don’t have the final municipal approvals, the lender will want to know where you are in the process, says Simms.

Bring your budget and cash projections
You should also bring the construction contract and a breakdown of overall project costs, including all expenses on the “use” side of the budget. In the contract, the builder outlines the total cost of construction, listing materials, labor, and other expenses, explains Spatz. For overall project costs, break down hard costs, such land and construction, and soft costs, which include interest payments, design fees, and the cost of obtaining approvals.
On the “source” side, display the loan amount you need and the equity you will provide to fund the project. “Typically a bank will finance no more than 80 percent of the cost of a project,” says Spatz. So if the project costs $1 million, then “you need to show where the other $200,000 will come from,” he says.

Simms recommends also bringing copies of any other documents that back up your budget analysis, such as the sales agreement, a demolition cost estimate, and leases or letters of intent.

In another document, show the lender how you plan to repay the loan by including cash flow projections for at least the first three years of business operation and the results of a market feasibility study, if you’ve performed one.

When in doubt
Typically a one-to-three-week process, the bank’s approval procedures begin after you provide the lender with a complete package of information. When in doubt about what a lender might want to see, Wagner recommends that you bring it along. To prospective borrowers, Simms says, “I tell them to bring everything they feel is relevant or unique to the project.”

Fulton Bank’s Carolyn French, vice president for corporate real estate, recommends checking in early with the bank, even before you’re ready to apply for financing, to gauge whether your plans are realistic and to get a handle on actual costs. “Very rarely do people say, ‘This project costs less than I thought it would,’ ” she says.