Understand who does what
Ask who would make the loan, who is arranging the transaction and who would manage payments or funding requests. These may be different parties.
The CFPB's lender-and-broker explanation distinguishes a lender making a direct loan from a broker helping a borrower find loans. It also notes that some institutions perform both roles. That consumer mortgage explanation is a useful starting point; establish each party's responsibilities in your particular property transaction.
If someone describes their role as an arranger, ask what that includes. Who makes the financing decision? Whose name will appear as lender in the documents? Who receives each fee? Who handles questions after closing? A company description alone does not answer these questions.
Separate the labels from the decision
“Bank” identifies a type of institution. “Private” can be used to describe a capital source or financing provider; ask what it means in the proposal you are reviewing. “Asset-based” emphasizes the asset supporting the financing. These descriptions concern different dimensions of a transaction rather than a simple choice between three completely separate products.
Property security is not exclusive to nonbank financing. The OCC's commercial real estate handbook addresses banks' assessment of property, borrower finances and repayment. Likewise, an emphasis on collateral does not tell you which other conditions a particular proposal includes.
Compare the actual requirements. Ask about property condition and value, ownership, existing obligations, borrower information, available cash and the repayment plan. Do not infer easier qualification, faster funding or lower cost from a category name.
Put both proposals on the same basis
Give each provider the same project information and compare documents dated for the same stage of the transaction. Record unanswered items as questions. A missing charge or condition is not a confirmed zero.
Use this blank checklist alongside the written proposals. Add the relevant document page or section to each answer.
| Detail to confirm | Proposal A | Proposal B |
|---|---|---|
| Named lender; arranger/broker role; fee recipients | __________ | __________ |
| Total commitment and initial advance | __________ | __________ |
| Cost/value basis; valuation source and date | __________ | __________ |
| Funds held for later release; eligible uses | __________ | __________ |
| Interest rate; fixed/variable basis; amount charged interest | __________ | __________ |
| Upfront, recurring, third-party and draw charges | __________ | __________ |
| Cash required at closing and during the work | __________ | __________ |
| Release conditions, inspections and reimbursement process | __________ | __________ |
| Security, guarantees and continuing obligations | __________ | __________ |
| Payment schedule, maturity and final amount due | __________ | __________ |
| Early-payoff charges; extension conditions and costs | __________ | __________ |
| Outstanding conditions, proposal expiry and next steps | __________ | __________ |
For home mortgages, the CFPB recommends comparing specific written loan offers using Loan Estimates. A business-purpose property proposal may use different documents. The practical aim here is to obtain comparable written information, without assuming every transaction uses that consumer form.
Follow the money through the project
Acquisition and renovation may have different funding schedules within the same proposal. A total commitment is not necessarily money available on the purchase date. Ask what is advanced initially, what remains for later work and whether fees or reserves reduce usable proceeds.
Before agreeing to draws, establish whether funds pay for upcoming work or reimburse work already completed. Ask which evidence and inspections are required, whether anything is held back, who pays suppliers meanwhile and how changes are handled. OCC's construction-disbursement discussion describes several bank funding methods; the relevant process is the one documented for your loan.
Compare financing percentages only after confirming their denominator. Loan-to-cost and loan-to-value measure different things, and current-condition value differs from estimated completed value. Use the LTV, LTC and after-repair value guide to organize those inputs.
Compare repayment as carefully as the rate
Write down the expected repayment source and its dependencies. A proposed sale or refinance still requires the relevant transaction to happen. Check maturity, scheduled payments, any large final payment and what the documents say about an extension. Do not build the budget around an extension that has not been agreed.
Ask for costs under your expected schedule and a delayed schedule, using the same assumptions for both proposals. Include fees and any early-repayment or extension charges that apply. A lower headline rate alone does not establish the lower project cost.
If the main issue is funding between property events, read about bridge financing. For a transaction with ownership, timing or repayment details to explain, build a private property transaction outline. Bring the unresolved comparison questions into a project inquiry. Review the prepared email and send it from your email app when ready.