In the world of private and alternative lending, brokers don’t usually lose deals because of interest rates or competition. They lose them because of their own flawed analysis.
Too often brokers begin quoting rates or structuring loans without a clear understanding of the borrower’s objectives, experience and actual deal structure. This backward approach not only leads to frustration and wasted time but also diminishes credibility with lenders and clients alike.
To consistently close transactions in today’s market, brokers must develop a methodical, strategic process, one that begins with the borrower and ends with the product. Not the other way around. Brokers need to know where they can go wrong, and how they can adopt a more disciplined, professional approach that leads to real results.
Understand the borrower
One of the most common mistakes brokers make is treating borrowers as if they were quick transactions instead of long-term partners. When the focus is only on numbers and documents, brokers miss the opportunity to build trust and uncover the borrower’s true needs and concerns.
“One of the most common mistakes brokers make is treating borrowers as if they were quick transactions instead of long-term partners.”
A simple initial conversation, where brokers listen more than they talk can lay the foundation for a lasting relationship. Understanding the borrower’s investment goals, pain points and communication style helps structure deals that not only meet underwriting criteria but also resonate with the client.
Every borrower has a particular area of expertise. Some are focused on multifamily properties, while others specialize in retail, office, industrial or fix-and-flip projects. Each niche carries its own lending dynamics, risk factors and documentation requirements.
Brokers risk recommending loan products that are misaligned with the borrower’s strengths and may not work for the lender when they fail to identify a borrower’s niche. This leads to mismatches and delays. A quick conversation about past projects and future plans can guide the broker to recommend financing that makes sense considering the borrower’s track record.
Deals that fit
Far too often, brokers spend time on deals that are either too small or too large for the borrower’s budget. This happens when brokers jump into the deal structure without confirming the investor’s financial boundaries.
Asking about price range, capital reserves and expected down payment early in the process ensures the deal size and loan terms are realistic. It also avoids presenting options that are outside of the borrower’s comfort zone, financially and psychologically.
Lender confidence in a deal often hinges on the borrower’s history. If a broker presents a ground-up development deal and the borrower has no history in construction or managing similar assets, the deal is likely to stall.
Verifying experience through property ownership documentation, rehab records or performance summaries provides crucial insight for both broker and lender. If the borrower lacks direct experience, the broker may need to structure the deal with additional safeguards or recommend the inclusion of an experienced partner.
Focus on financials
Valuation issues are one of the most frequent causes of deals falling apart. Brokers who fail to verify comparable sales in advance may find the property appraises below expectations, forcing loan adjustments or deal cancellations at the eleventh hour.
A proactive approach involves securing four to six comparable sales within a reasonable radius of the subject property, ideally from the borrower’s realtor. This ensures both broker and lender are working with grounded expectations from the start, minimizing surprises during underwriting.
Despite the flexibility of private lending, credit scores still play a vital role in loan approvals, particularly on larger transactions. Brokers who assume a borrower’s credit is sufficient without verification often find themselves scrambling when the real score is revealed.
Requesting a credit report at the outset not only confirms eligibility but also allows the broker to position the borrower correctly with the right lenders. This simple step saves time and helps avoid unnecessary rejections or restructured terms midway through the process.
Verify borrower claims
A well-structured broker process includes early-stage verification of three critical borrower attributes: credit, experience and liquidity. When it comes to credit verification, begin by reviewing the borrower’s credit report as part of initial due diligence.
Many borrowers overestimate their score, and this discrepancy can derail a loan if discovered too late. Understanding the credit profile early allows the broker to match the borrower with programs that fit.
Experience verification is equally important. Ask for documentation of prior projects, especially those that align with the current deal’s asset class. This includes rehab records, ownership summaries and photos. Lenders are much more comfortable lending to borrowers with proven experience. If the borrower lacks it, you may need to restructure the deal or add a co-borrower.
It is crucial to verify a borrower’s liquidity and down payment capabilities. Liquidity is a frequent point of failure. Before proceeding, brokers should request bank statements or proof of funds to confirm the borrower can meet the required down payment and closing costs. Without this, even a strong deal can collapse days before closing.
Top professionals don’t rely on guesswork. They follow a process. Just as elite athletes use routines to maintain consistency, brokers should approach every borrower interaction with a structured, repeatable system. That should include relationship building, verification and alignment before any deal is sent to underwriting. Following this process increases the broker’s closing ratio, enhances his or her reputation and reduces the number of deals that fall apart in the final stages.
Most brokers lose deals not because of lender requirements or borrower failures, but because they start analyzing from the wrong place. They begin with rates and loan terms instead of with trust, experience and verification. When brokers flip the process and begin with relationship-building and due diligence, they gain a significant edge.
This professional discipline is what separates high-performing brokers from the rest. And it’s exactly what the current lending landscape demands.
