As published in Scotsman Guide's Commercial Edition, June 2006.
A common complaint mortgage brokers have about commercial loans is that they're too time-consuming. But who's at fault?
Perhaps it's the short-sighted broker who is shopping for the best rates, as opposed to the best product for the clients' needs. Or maybe it's the overly optimistic borrower, whose property value is determined from little more than consulting a handful of tea leaves. Or it could be the lender that is so nonchalant about closing loans that it makes you wonder how it can afford those fancy trade-show booths.
So how do you build an efficient, successful commercial business amid all that blame-shifting? The answer lies in the questions.
Knowing the right questions to ask before the loan process begins can help you map out the shortest distance between the application and the closing table. To be successful, you must be prepared to interview lenders and borrowers. Once you learn the basic sets of questions for both groups, you'll be better able to find the best lender for each borrower.
When you first meet prospective borrowers, you often have no idea what they need. Maybe they're commercial-property investors looking to add another apartment building to their portfolio. Maybe they are hardware-store-owners who want to take cash out to purchase more inventory.
No matter what, you want to be in a position to say "yes" as often as possible. That's why it's important to have a small stable of lenders with varied product lines to accommodate nearly any borrower scenario.
If you researched every lending niche out there, though, you wouldn't have much time left to prospect for new business. Consider focusing on the basic spectrum of money sources: traditional lenders (banks), intermediate lenders (stated income/stated asset) and private-money sources (offering less-aggressive rates and terms in exchange for fast turnaround and minimal paperwork).
When you're speaking with lenders, confirm that they specialize in the type of financing you seek. No lender, after all, can truthfully claim that it does everything well. Once establishing what the lender does best, discuss the terms and conditions of its loan programs. Does it have a prepayment penalty? Are the loans fully amortizing or do borrowers face balloon notes after a certain time period? What about document-preparation fees?
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