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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   September 2009

Fix Funding Woes with a Personalized Approach

Remember that clients' needs are as diverse as the clients themselves

At a time when commercial borrowers have an unprecedented need for cash, they face the harsh reality that the more-traditional sources of capital have dried up. Brokers, by the same token, are recognizing that they need new, innovative ways of doing business to navigate the market successfully.

For many brokers, moving past trendy loan solutions and focusing on individual clients' specific needs when seeking funding is helping them better help their clients.

Research firm Foresight Analytics estimates that about $814 billion in commercial mortgage loans will mature within the next three years, with about $250 billion coming due this year alone.

This means that commercial mortgage borrowers must refinance amid a market decline, tight credit availability and falling commercial real estate prices or sell properties that may have lost 25 percent to 40 percent of their value since the market high.

Further, because the market for commercial mortgage-backed securities (CMBSs) no longer exists, lenders have sharply curtailed their lending. Many brokers simply can't locate loans for clients.

Mortgage brokers tasked with locating funding for clients with a wide variety of needs and with varying degrees of credit issues must be able to tap into a ready pool of credit resources. First, brokers must recognize that each client's needs are different.

Although one client may be well-suited for institutional-financing solutions, many more will not. By maintaining a well-diversified lender database and having a variety of funding options for clients, brokers can tap into the best solution for a particular client's needs -- rather than trying to meet everyone's needs with a general loan product that potentially could jeopardize some clients' financial health.

For instance, some brokers may assume that because the commercial credit market remains tight, double-digit hard-money loans are the only available option for borrowers. Traditionally, hard-money loans have been a last-ditch solution for borrowers who cannot locate funding by any other means. When borrowers can qualify for better rates and terms, it rarely makes sense for a broker to push this solution.

In many cases, however, there are other funding resources, domestically and internationally, that are willing to lend money to deserving property-owners.

To find the best funding for a particular client's needs, brokers must set aside their preconceived notions of the rate and terms for which their client likely will qualify. They must be willing to go the extra mile in locating viable solutions for their clients. Although a high-rate loan package with a short term might be the easiest and fastest solution, brokers who work diligently often can find a more modest interest rate for their borrowers.

The key to succeeding lies in diversifying solutions and avoiding temporary, trendy financial solutions that might not stand the test of time. Conventional lenders are slowly beginning to test the market and are showing signs of extending credit to worthy borrowers and projects. Brokers can locate these lenders through solid research and provide borrowers solutions by building rapport with these lenders.

To find the best, most-equitable solutions to clients' funding problems, seek the best-possible results for these borrowers. Brokers who maintain this commitment to their clients not only will help them achieve their goals but also will establish themselves as vital business partners.

By employing these tactics, you likely can meet your clients' needs and lay the groundwork for years of success. If you conduct yourself properly and meet these needs effectively, then profitable, long-lasting relationships -- and profits -- certainly will follow.


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