If new brokers follow three tips, funding smaller loans should be less of an adventure

Joy Hunner, executive vice president, GEM Commercial Lending

As published in Scotsman Guide's Commercial Edition, March 2009.

As the commercial market maintains some momentum, new brokers continue to enter the field. Often, these brokers start with clients who seek small commercial projects instead of large-scale developments.

Too often, however, new brokers may not have developed relationships with lenders and may therefore be unaware of the lending options for funding loans of $5 million or less. As such, their clients may feel limited in their loan choices.

This doesn't have to be the case.

Although novice commercial brokers may not have the years of experience and relationships with lenders needed to find the best products for their clients upfront, they can follow some tips to speed up the learning curve.

1. Get to know lenders

Too often, new commercial brokers are inundated with e-mail blasts and blanket offers for generic deals that don't really suit most small-balance commercial loan requests. In truth, small-balance commercial can have some favorable funding options if brokers know where to look.

Small-balance commercial loans often have been saddled with higher interest rates and large prepayment penalties. The key to getting your client the best pricing and terms is to know how to package the loan effectively for a lender. Frequently, even clients with perfect credit, a good loan-to-value ratio (LTV) and a high debt-service-coverage ratio (DSCR) may end up with a higher interest rate than they deserve.

The trick for getting your clients a good interest rate is to get to know your lenders. Don't just rely on their rate sheets. Reach out to them to find out what their hot buttons are.

For instance, what do they look for most with clients? Liquidity? Net worth? Global cash flow? Number of investment properties owned? Types of outstanding debts?

In addition, determine how important property type and condition are to each particular lender. Look at its lending patterns. Does it prefer certain lending areas or property types?

Page: 1 2 Next