The commercial loan process is a multi-stage workflow that transforms a borrower's financing request into a fully documented, funded credit facility. While timelines vary significantly by deal complexity — from a few weeks for a straightforward community bank loan to several months for a complex leveraged buyout — the process follows a consistent structure.
Origination begins when a borrower (or their financial advisor) approaches a lender with a financing request. The relationship manager or originator gathers preliminary information — financial statements, business description, purpose of borrowing, collateral description — and makes an initial credit assessment. If the opportunity appears viable, the lender may issue a term sheet or letter of intent outlining the proposed terms.
Underwriting is the analytical core of the process. Credit analysts build financial models projecting the borrower's revenue, EBITDA, cash flow, and debt service capacity; conduct industry and competitive analysis; assess management quality; review legal and regulatory exposure; and analyze collateral. The output is a credit approval memorandum (credit memo) presented to the lender's credit committee or approval authority.
Credit approval involves a formal review by a credit committee or designated approval authority. Complex, large, or unusual credits may require multiple levels of approval. The approval sets the terms under which the credit may be closed: the loan amount, structure, pricing, covenants, security requirements, and any special conditions.
Loan documentation is the legal process of translating the approved terms into binding agreements. Counsel for the lender (and often separately for the borrower) drafts and negotiates the credit agreement, security agreements, guaranties, UCC financing statements, and title insurance. Closing involves the execution of documents, satisfaction of conditions precedent, and funding of the loan proceeds.
Post-closing, the lender's credit administration team handles ongoing monitoring: collecting and reviewing financial statements, testing covenant compliance, processing amendments, and managing the credit through any events of default or restructuring needs.