Due Diligence | First National

Loan Due Diligence

How We Evaluate

Part of First National's Underwriting Process

Due diligence is central to First National’s internal underwriting process, moving beyond simple document collection to verify all material facts supporting the transaction. We ensure the property, sponsorship, operations, and collateral align perfectly with initial representations. As a principal lender, the scope of our credit evaluation is entirely property-specific and tailored to the unique risks of each transaction.

Our 8-Point Underwriting Framework

01 Borrower and Sponsor Review

First National evaluates the individuals and entities responsible for the transaction. Depending upon the financing request, this review may include the below. The objective is to understand both the legal ownership of the borrower and the financial capacity and experience of the sponsors supporting the transaction.

Legal & Corporate Structure

Borrower and ownership structure
Formation documents, organizational documents and amendments

Financial Profiles

Personal and business financial information
Liquidity and financial capacity

Principal & Guarantor Details

Identification of principals, guarantors and beneficial owners, as applicable

Equity & Experience

Source and amount of borrower equity
Relevant ownership, operating and development experience

02 Property Financial and Operating Review

For income-producing and operating properties, First National reviews historical and current financial information to understand the property’s actual performance and the sustainability of the income supporting the requested financing.

Specialized assets may require additional operating information. For example, senior housing, hospitality, golf courses and marinas may be evaluated using operating measures specific to those property types.

Historical Historical & Baseline Data

- Historical financial statements and tax returns
- Budgets and financial projections

Tenancy & Revenue

Rent rolls, occupancy information, and lease data
Revenue breakdown by material source

Current Operations

Current operating statements
Operating expenses and significant departmental expenses

Asset Preservation

Capital expenditures and anticipated property improvements
Deferred maintenance assessments and reserve schedules

03 Ownership and Organizational Documentation

First National reviews borrower formation documents, operating agreements, and organizational records necessary to confirm the parties responsible for the borrowing entity. Depending upon the structure, this review may include:

Core Formation Records

Borrower formation documents and initial certificates
Ownership schedules detailing equity distribution

Authority Verification

Authorized signatory designations for the transaction
Filed corporate amendments and records of structural updates

Governing Agreements

Operating agreements and partnership agreements
Corporate bylaws and corporate resolutions

Complex Structure Review

Affiliated companies and multi-tiered entity paths
Material trust agreements and third-party credit dependencies

04 Appraisal and Third-Party Reports

First National determines which third-party reports are required for each transaction to properly evaluate risk and asset condition. An appraisal is ordered independently to serve as one component of the credit decision, and depending upon the property, this comprehensive review may include:

Independent Appraisals

Valuations ordered directly from certified, independent appraisers
Comprehensive asset valuation integrated into the overall credit decision

Environmental & Site Safety

Phase I and Phase II Environmental Site Assessments (ESA)
AlTA/NSPS land surveys and boundary verification reporting

Physical Property Health

Property Condition Assessments (PCA) and physical evaluations
Structural engineering reviews and capital improvement validation

Title & Specialized Scopes

Comprehensive title search and encumbrance evaluations
Specialized third-party reports tailored to unique property types

05 Property, Environmental and Regulatory Review

Due diligence may include review of the physical property, its permitted use and matters that could affect the value, operation or marketability of the collateral.

The scope of this review is property-specific. A marina, golf course, senior housing facility, hotel or other specialized asset may require diligence that would not ordinarily apply to a conventional commercial property.

Zoning & Compliance

Zoning and land-use approvals
Building permits and certificates of occupancy

Engineering & Site Access

Geotechnical or engineering information
Access, easements, and other property rights

Environmental Site Risks

- Environmental matters and historical site usage
- Wetlands, water rights, or water-source issues where applicable

Specialized Operations

Licenses, permits, and regulatory approvals required for specialized operations
Asset-specific diligence for hospitality, senior housing, or unique property types

06 Property, Environmental and Regulatory Review

Due diligence may include review of the physical property, its permitted use and matters that could affect the value, operation or marketability of the collateral.

Zoning & Occupancy

Zoning and land-use approvals
Building permits and certificates of occupancy

Geotechnical & Land Rights

Geotechnical or engineering information
Access, easements, and other property rights

Environmental Framework

Environmental matters
Wetlands and water rights protections

Resource Availability & Operations

Water-source issues, where applicable
Licenses, permits, and regulatory approvals required for specialized operations

07 Construction and Improvement Due Diligence

For new construction, expansion and substantial improvement projects, First National’s diligence extends to the proposed work and the controls governing the use of loan proceeds.

Plans & Approvals

Plans and specifications for the proposed work
Required building permits and municipal approvals

Project Contracts

Contractor background information and qualifications
Executed construction contracts and project schedules

Budgets & Allocations

Comprehensive construction budgets
Proposed sources and uses of funds

Financial Controls

Required borrower equity contributions
Project contingencies and cost-overrun protections

08 Management, Material Contracts and Specialized Operations

For properties dependent upon an operating business, First National may review the experience and qualifications of key management personnel and any third-party management organization material to the property’s performance.

Leadership & Oversight

Experience and qualifications of key management personnel
Track records of third-party management organizations material to performance

Legal & Structural Frameworks

Property management agreements and oversight rules
Entity operating agreements governing the ownership structure

Core Operational Agreements

Material property contracts and vendors
Franchise agreements and brand affiliations

Property & Revenue Arrangements

Construction contracts for ongoing work, where relevant
Other structural arrangements directly affecting the property or its income

Free Borrower Resource

Download the Due diligence Guide

Prepare for financing with a clear understanding of the due diligence process. Our complimentary guide outlines the documents and information First National reviews, including borrower qualifications, property performance, financial records, and third-party reports.

A due diligence checklist helps borrowers organize essential information, prepare for underwriting, and move toward closing.