From term sheet to closing: what happens in between

A signed term sheet is not a loan. It is the start of a process that runs through underwriting, third party reports, legal documents, and final approval. Most deals that slip do so in this stretch, usually for avoidable reasons. Knowing the sequence helps you keep it on schedule.

The deposit and the application

Once you sign, the lender will usually ask for a deposit. It covers the lender's costs for reports and legal review. Read the terms carefully. Some portion is often nonrefundable once reports are ordered, even if the loan never closes.

At this stage the lender also sends a full checklist. Expect requests such as:

• Entity documents for the borrowing entity and any guarantors
• Rent rolls, operating statements, and leases
• Personal financial statements and schedules of real estate owned
• Purchase contract or existing loan payoff information
• Insurance details and a contact for property access

The faster this package comes back complete, the faster everything else moves.

Third party reports

Most commercial lenders order independent reports. They are often the longest item on the timeline.

• Appraisal. Confirms value and drives final loan sizing.
• Environmental report. A Phase I reviews site history for contamination risk. If it flags a concern, a Phase II with sampling may follow.
• Property condition report. Identifies deferred maintenance and may set a repair reserve.
• Survey and zoning report. Confirms boundaries, easements, and legal use.

Reports can change the deal. A lower appraisal can reduce proceeds. A condition report can add reserves. Plan for that possibility rather than assuming the term sheet numbers are final.

Underwriting and credit approval

While reports are underway, the lender's underwriter verifies everything you submitted. They test cash flow, review leases, check credit and background on guarantors, and confirm liquidity and net worth requirements.

The result goes to a credit committee. Approval may come with conditions that were not in the term sheet. Common examples are added reserves, a tighter covenant, or a change to recourse terms. This is where an advisor can help negotiate before positions harden.

Legal documents and title

After approval, lender's counsel drafts the loan agreement, note, mortgage or deed of trust, and guaranty. Your own attorney should review them. Points that seemed settled in the term sheet often need attention here, such as cash management triggers, transfer provisions, and carve out guarantees.

At the same time, the title company prepares a commitment and works to clear exceptions. Liens, old easements, or entity issues can surface late. Order title early and review it as soon as it arrives.

Closing and funding

The final step is a closing checklist that ties everything together. Expect:

• Insurance certificates naming the lender correctly
• Estoppels or subordination agreements from tenants, if required
• Organizational resolutions and good standing certificates
• A settlement statement showing every source and use of funds

Funds move only after every item is signed off. A single missing certificate can push funding by days.

Keeping the process on track

A few habits make a real difference:

• Respond to requests completely the first time
• Order title and survey as early as the lender allows
• Engage your attorney before the loan documents arrive
• Build cushion into any purchase contract or loan maturity date

If you are preparing for a financing, our checklists show what lenders typically request at each stage. When you are ready to discuss a specific deal, contact us.