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The bank's "tenderizing" of this borrower is a perfect setup for a commercial mortgage broker for a number of reasons. First, rate and terms suddenly become less of an issue for the borrower. The issue now is whether or not he can get the loan. The size of the broker fee may also become less important to him because he now knows he no longer has the bank option. And because the borrower already perceives the transaction to be more difficult, he is likely to be more cooperative in supplying required documentation and in considering alternative lending options.
The transaction may be complex, but once the broker understands it, it can be simply and crisply explained in the executive summary of the loan request. Take, for example, a recent transaction in which a borrower had been to every available bank in his city with a request to fund an automotive-repair facility. He was turned away every time. The facility, while a clean property, was located on two contiguous parcels. Each parcel was owned by two separate entities -- each with interests in the other and with other unrelated partners.
Understanding the ownership structure was the first step to understanding the financials in the loan request. With effort, the broker created a simple ownership schematic -- clearly describing the situation and loan request -- in a brief executive summary. The first lender to receive the loan package immediately said it was no problem and accepted the loan.
Banks have varying policies
Many good loans are declined by banks because they must meet regulatory requirements unfamiliar to brokers, such as the Financial Institutions Reform, Recovery and Enforcement Act that limits the percentage of assets committed to commercial real estate. Consequently, certain credit requirements may vary between institutions.
Some bank policies vary based on the bank's previous transactions and even based on the bank staff's personal preferences. In one instance, a community bank stopped lending to salons after a board member's wife had a bad hair-coloring experience.
Additionally, some banks claim their loans are not based only on scores, but they nevertheless turn certain scores away, regardless of the strength of the debt coverage.
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Mortgage brokers have always been a preferred choice for borrowers in need of more personal service and greater options. Creative brokers who know their numbers and present understandable loan packages can thrive when banks turn down loans.
Alfred Acitelli is a principal with Imperium Commercial Capital, a commercial mortgage broker with nation-wide service. He may be reached at firstname.lastname@example.org or (248) 446-7400 or through his Web site at www.imperium-commercial-capital.com
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