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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   December 2014

3 Steps to Revitalize Your Loan Submissions

Clear communication, ethical practices and feedback requests reduce self-imposed obstacles

Why do so many loans seem dead in the water before brokers even e-mail their submissions to lenders? Commercial loans are not cut and dried; each case is unique, with complexities that  should be understood and specific questions that must be asked upfront. But when you are competing for dollars and dedicated to delivering a loan proposal that rises to the top of the submission pile, how can you help prevent an unsatisfactory outcome?

Contrary to broker perception, unsuccessful submissions are not always because of the creditworthiness of the deal but, surprisingly, are often a direct result of the quality of the submission itself and the all-important impression the broker is conveying. Many brokers are responsible for their own loan rejections because of three missteps they make along the way, knowingly or not.

Avoiding these common missteps is easier than you might imagine. The following three steps will help you avoid the usual pitfalls that can stop a worthy loan submission in its tracks.

1. Submit like a pro

Not long ago, when the lending business was slow, it may have been worthwhile for lenders to make the extra effort to decipher poorly articulated or shoddily packaged loan submissions and play a few rounds of back-and-forth with brokers to figure out exactly what they were looking at. This is not true now.

Capital markets have picked up steam; lenders are busy once again and thus less inclined to expend time or energy on careless brokers who make their jobs more difficult. Sending a lender a vague, nonspecific e-mail about a loan transaction or, worse, submitting a transaction that is confusing or badly written, is the surest way to make your deal drop to the bottom of a lender’s priority list or get it rejected outright. 3 Steps to Revitalize your Loan Submissions; Illustration by Dennis Wunsch

Never forget that your loan summaries and submissions are not considered in a vacuum. The lender that reviews them must read many others besides yours, some by brokers who may be more experienced or erudite than you.

Therefore, crafting a well-written, grammatically correct e-mail transaction summary is your first step in a successful loan-approval process. This step is even more important if the interaction with the lender is your first. Misspellings, poor punctuation, incomplete or broken sentences, and incorrect word usage are not just unfortunate, they imply your business abilities may be in line with your communication shortcomings.

Poorly composed executive summaries are an immediate way to alienate a lender, but this holds true for any sloppy e-mail communication between you, your lenders and your clients. Such e-mails not only lack professionalism, they may convey a lack of  intelligence — never the image you want to portray.

Effective communication is key. Does this mean you need to astound your readers with eloquence? Not at all; straightforward and direct writing is best. Your e-mail summary should not be a novel covering every intricacy of your loan transaction, but it shouldn’t be a one-sentence blip either.

Although lenders don’t want to confront an incoherent jumble, they also don’t want to scroll through page after page of drab, superfluous detail. If you are unsure about which details you must include in your initial e-mail summary, ask yourself, “If I were the lender, what basic information would I need to determine if I’m looking at a viable transaction?” Think about how you would want a summary to look so you could consider it quickly and efficiently.

Make your case early. Besides clear and effective communication, you should make a strong, concise case for the strength of your loan request. Why is your loan a good one to approve? Providing only essential loan information isn’t always enough; lenders want to understand the strengths of the file, and why it warrants approval.

A lender initially reviewing a file might overlook compelling aspects of a loan tucked away within, so place the most positive aspects of the loan request toward the top of the summary. You can even use formatting like a bold font to make certain that vital details stand out when your summary is quickly scanned.

Negative aspects of a proposed transaction should never be placed near the opening of your submission e-mail. These may stop lenders in their tracks and prevent them from discovering your positive arguments buried deeper in the submission. Lead with your strengths.

In addition, use the forms required by lenders, when applicable. Some lenders make your job (and theirs) easier by providing the application or submission form they want you to use. If a specific form is the lender’s policy or even preference, use it and provide all the information the document requests. Complying with the lender’s documentation request — and doing so accurately — will ensure the lender’s expedient review and save you the effort of having to formulate your own summary.

Whether you use a lender’s form or construct your own proposal, put your best foot forward by presenting a clear, comprehensive and concise summary, always spell- and grammar-check your content, and make the most compelling case possible for your loan approval.

2. Don’t be greedy

When Gordon Gekko, protagonist of the 1987 Oliver Stone film Wall Street, declared, “Greed is good,” many people mistook his ignoble assertion for a mantra. In reality, when it comes to brokering a commercial real estate loan, greed will only get you an empty database and a bad reputation.

Consistently successful lenders and brokers are in the commercial lending game to make money, but not at the expense of their ethics and common sense. An unrealistic fee added to a submission can ground a commercial loan liftoff just as much as an unprofessional executive summary. In all business practices, compensation should be fair and accurately represent the amount of actual work involved in a deal as well as what the market will bear.

Ultimately, overcharging on a commercial real estate loan is a lose-lose proposition; borrowers won’t accept it and lenders won’t tolerate it. Don’t kid yourself. Any borrower who agrees to an inappropriate fee is in a “no option left” position, which means you are taking advantage of that person. When it comes down to it, the borrower may not pay your fee at all and most likely will never request your services again, nor recommend you. You may even be negatively reviewed online, a service provider’s nightmare.

In any case, someone or everyone loses. Furthermore, a large fee attached to a loan submission alerts the lender that there may be a daisy chain of co-brokers tied to the loan request, which will probably result in wasted time for all parties. Even worse, it tells the lender that not only are you greedy and unprofessional, you may be inexperienced or  incompetent, and hence not trustworthy as a  client — meaning your future loans are unlikely  to be considered. Overcharging a borrower is often  enough for a lender to pass on a loan that might  otherwise have had a strong chance of approval.

Brokers often make the mistake of not just overcharging their clients, but demanding large referral fees from the lenders themselves. They develop the skewed impression that lenders are under an obligation to lend money and to compensate brokers in the process, which is not true.

Making a loan and compensating a referral source are entirely at a lender’s discretion, and never an obligation. A handful of lenders believe a broker fee in excess of 2 points — perhaps even 3 points  if a co-broker is involved or the transaction is  complex — is reasonable. Some lenders may even pay yield-spread-premium or referral fees on top of an origination fee. Consider yourself fortunate if you encounter lenders like this.

If you believe you should be able to charge a borrower 4 points or 5 points without objections from a lender, you may also be good at rationalizing why so many of your seemingly closeable deals are turned down by lenders, why those lenders are slow to return your calls or e-mails (if they return them at all), and why you almost never get repeat business.

If this scenario describes you, some personal re-evaluation is in order.

3. Gather feedback

Think back to a time when a lender turned down your loan early in the process, and you weren’t sure why. Did you ask why? Many people don’t realize they can alter unsuccessful pattern behavior merely by asking questions.

Remember that lenders are invested in your success. They want to close your viable loan submissions because that means more money for them, not to mention a lucrative and ongoing client relationship with you. They will usually be more than happy to give you feedback about what went wrong with your transaction or why a deal you thought should have been approved wasn’t.

Go for the gold. Ask your lender to be candid, explaining that you want to improve your business and appreciate any feedback, good or bad. You may learn that your executive summaries haven’t been as strong as you thought, or that your fees were out of line — or both.

Criticism may be tough to swallow at first, but it is valuable. Consider it a constructive professional critique that would cost a tidy sum if you requested it from a business consultant. Any feedback that can immediately improve your business, increase your chances of getting future deals closed and, inevitably, put more money in your pocket, is worth hearing.

Remember to always keep your cool. If a lender does not want to proceed with your loan, get all the feedback you can about why, but even if you disagree with the reasons, whatever you do, don’t become confrontational with lenders. It is their right to proceed — or not — with any loan request.

•  •  •

Longevity and success in the commercial mortgage business depend upon your ability to keep learning and growing professionally. This helps keep your borrowers and lenders happy and looking forward to working with you repeatedly. Consider the techniques described in these three steps when self-reviewing your last loan write-up or most-recently rejected deal. The insight you gain from this self-analysis should prove invaluable and dramatically help improve your business success going forward. 


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