What do you do if your commercial mortgage borrower is turned down for a bank loan? It’s a question every broker in the business of closing commercial deals should be asking themselves in order to make sure they’re providing borrowers with the best possible financing options.
After a bank turndown, a high-interest hard money loan might look like the only option, and in some cases, it will be the best choice for your borrower. However, there are plenty of non-conforming commercial lenders who operate in the space between the bank and hard money. With better terms and interest rates than hard money lenders, and more flexibility than banks, these lenders can be a valuable asset to many commercial mortgage brokers.
So, how do you navigate this middle ground? What should brokers interested in closing these deals be looking for in a lender? A non-conforming commercial mortgage.
A proven track record of closing commercial mortgages
The first thing you’re going to want to do is seek out lenders in the non-conforming commercial niche with plenty of experience. The lenders with the most longevity in the industry have been in business for many years for a reason – they’ve got a process that works and have proven capable of adapting to or weathering changes in the industry.
Non-conforming lenders that have been in business for a long time have had more time to cultivate the knowledge and skills necessary to successfully close non-conforming commercial mortgages. They’ve handled challenges over the years and they know how to leverage those experiences to make their businesses better and to use that knowledge to make sure they’ll be in business for years to come.
Additionally, because they’ve built up their expertise over their years in business, they can provide valuable information to brokers who are new to commercial lending, helping to ensure mutually beneficial success.
An easy submission process
Unlike banks, non-conforming commercial mortgage lenders have a simple and straightforward submission process that doesn’t involve as much documentation. This is because private lenders don’t face the same strict guidelines by which banks must abide.
For example, all a lender like APEX needs to do an initial evaluation of a deal is a completed 1003 or application, a credit report with scores and trade lines, a summary of the deal, and photos of the property the borrower wants to pledge as collateral.
A variety of programs
As a broker operating in the non-conforming commercial niche, you may find yourself fighting some uphill battles with borrowers who thought they’d qualify for bank financing. All of these borrowers will have different credit histories and financial situations, and the properties they’re looking to pledge as collateral will come in many shapes and sizes.
Because you’ll see a variety of borrowers, it’s important to choose a lender with a number of different programs so that you can give your borrowers choices. Being able to present the best financing option for each borrower is crucial to closing more deals. You need to work with a lender that offers a variety of programs that fit multiple types of commercial borrowers.
A lender who listens
If your borrower has been turned down for a bank loan, it’s likely for one of a handful of common reasons. Their credit score might not meet a bank’s strict requirements, they might be behind on taxes or other non-mortgage-related debts, or they might simply need to close faster than the bank is able.
Regardless, these are situations in which you need to seek out lenders who will listen to your borrower’s story and to take the time to understand their situation fully. Non-conforming commercial lenders don’t have the same strict guidelines as the banks, so they’re able to evaluate each borrower on a case-by-case basis. These lenders know that your borrower is more than their credit score and their past financial issues.
Fast underwriting, processing and closings
In situations where time is of the essence when closing small-balance commercial mortgage, a bank is unlikely to be able to meet your borrower’s needs. Because they’re more heavily regulated, closings with a bank can take months. Sometimes, a borrower can’t afford to wait that long for funds.
If this is the case, a non-conforming commercial lender will generally be your best bet. You’ll still be able to get your borrower a good deal that makes sense for their situation, and if you choose the right lender it can close in a matter of weeks.
When a borrower is turned down by the bank, a high-interest hard money loan might seem like their only option. And while in some cases, a hard money loan will be the right choice, many borrowers could obtain a mortgage from a non-conforming commercial lender.
In these cases, you’re going to want to seek out small-balance commercial lenders with plenty of experience and a proven track record of closing deals. These are lenders who have the know-how to properly evaluate a non-bankable borrower’s financial situation, listen to their story, and close the deal within the time frame your borrower needs. Additionally, you should seek out lenders with a variety of programs to fit the needs of plenty of non-bankable borrowers and an easy submission process.
When you find yourself with a borrower between the bank and a hard-money place, a non-conforming commercial lender could very well be the best choice.