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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   April 2010

The 3 R's of Recovery

To adapt to this market, review, reinvent and rejuvenate -- here's how

Gone are the days when banks and investors were clamoring for commercial mortgage brokers' loans and clients. In the current cycle, commercial loan programs dry up overnight, lenders come and go, and deals that could have been done yesterday are laughed at today.

Brokers who adapt to the new market realities can prosper, however. Often, this requires adding new services and reaching out to past clients. By taking three steps -- reviewing their current operations, reinventing their services and rejuvenating themselves -- brokers can get through the current business cycle on top.

Step 1: Review

It's time to have an honest conversation with yourself about where you are, what you need to do and where you want to go from here. If your business has relied solely on originating and packaging commercial loans to place with wholesalers in the secondary market, your options are declining daily. Similarly, if you structure and prepare loan packages to present to local banks, you're likely getting more rejection letters than commitment letters.

The mortgage and real estate business is cyclical, and brokers must take responsibility, acknowledge the need to adapt, make the necessary adjustments and press on. Start by asking yourself the following questions:

  • Are commercial origination fees my only revenue source?
  • Am I exploring new, innovative options and products to secure funding for my clients?
  • Is my advertising and marketing geared solely to lending to commercial borrowers?
  • Do I have a method for keeping in touch with clients to maintain top-of-mind presence?
  • Am I seeking new products and services that are related to what I already do?
  • Am I mining my database to take maximum advantage of trusted client relationships?
  • Am I maximizing my productivity and streamlining my operations?
  • Am I outsourcing whenever possible to improve efficiency and profitability?
  • Am I exploring new relationships with peers with whom I can possibly partner?

In addition, consider what you will do if commercial lending dries up even more. When a business operates with a singular source of revenue, it can be catastrophic when that revenue disappears. Focus on developing new products and revenue sources for your company so that a drop in one or two areas will not have such a dramatic effect on your overall revenue.

Step 2: Reinvent

When you have reviewed your current business operations, it's time to consider your options. Often, you must reinvent your business by offering new loan products and services.

There are many ways to enhance your existing loan-product lineup. If you have never explored U.S. Small Business Administration (SBA) lending, for instance, it's wise to learn these programs' guidelines. SBA lending is rapidly becoming the best option for many commercial borrowers.

In addition, review industry periodicals to stay on top of new products, new lenders and input from your peers. You also may wish to explore commercial net-branch opportunities to expand your access to proprietary loan programs. Visit local banks that are still lending and offer your services as a broker.

Consider the following potential growth areas for new services you can offer, as well.

  • Add merchant cash advances. Small businesses are strapped for cash, and banks are less interested in making working-capital loans. Certain businesses that accept credit cards can be eligible for substantial cash advances against their future credit card sales. Brokers can capitalize on this service by offering it to their business-owner clients. Many business-owners are unaware of this option, and merchant-advance companies often pay brokers large fees and sometimes residuals for originating these types of transactions.
  • Consider commercial energy sales. Energy-supply companies likely would love to have access to your commercial clients, and they often will pay you for your assistance. If you are located in a state that has deregulated its utilities, you may be able to arrange to sell electricity, natural gas or both to your existing clients and to other commercial businesses in your area. This has been lucrative for some businesses, as commissions often continue as annuities.
  • Manage real estate owned properties for banks and credit unions. Many of these institutions are flooded with foreclosed properties. They often seek individuals who they can trust in areas outside their base of operations to inspect properties, schedule contractors or monitor their assets during the foreclosure process. If these duties fall within your expertise, they could be options. Check with your state licensing department to make sure you have the proper licenses, if required.
  • Explore private-loan servicing. In the current economy, most investors are clamoring for better returns on their investments. Look for seasoned private-money lenders or individuals who would like to learn more about private lending and develop a portfolio of private loans for them that you can service -- for a fee, of course

Step 3: Rejuvenate

Once you have decided on the services you'll add to your business, you must let your current and prospective clients and contacts know. To stay on top, you also must consider some basic business-management tactics so that you can work leaner in the down market.

First, develop and maintain a strong network. If you don't have a contact database, it's time to build one. Everyone you know, meet and think you need to meet should be in your database. If you are not adding at least 10 to 20 contacts to your database per week, you have to get out in front of more people. There are plenty of software programs and newsletter services that can assist you in maintaining contact with your database with minimal effort.

Another key is to embrace online social networking. The Internet has made it even easier to get your story out there. Even if you're not computer-savvy, you likely can find someone to give you a quick tour of the various social-networking sites. E-mail marketing, when used properly, also can be a powerful tool.

In addition, put some controls in place to maximize your productivity. Make appointments with yourself and keep them. Block out an hour or two each day to make 25 outbound calls and to send 25 e-mails to previous clients, contacts, peers and referral sources. Tell them about any of your new services and product offerings.

Finally, review your expenses line by line. Do you really need that expensive office space or a copier-scanner that has every option? Look into computer servers that use cloud computing to enhance and expand your technology and avoid costly computer-equipment upgrades. Explore the benefits of outsourcing tasks such as payroll and bookkeeping as much as possible. Check out virtual office space, virtual personal assistants, virtual live-answer services and virtual marketing.

•  •  •

Commercial mortgage brokers can persevere through the current business cycle and any future cycle by regularly taking the above three steps and thinking about their businesses proactively. In fact, the difference between success and failure often is linked to your ability to take immediate and decisive action. Accept responsibility, take action and stay focused.


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