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When is a Small-Balance Commercial Mortgage Right for Your Borrower?

Many small business owners have trouble obtaining financing for their commercial property through banks. This is why they come to you, a commercial mortgage broker. It’s your job to get to know your clients, understand their financial situations and needs and get them the mortgage they need to accomplish their goals. In many cases, this is going to mean submitting the deal to a small-balance commercial mortgage lender. But how will you know when this is the best solution for your borrower? Here are some examples:

Your borrower has past credit issues that have since been resolved or that they are actively working to resolve.

A lot of small business owners have some bumps on their credit reports, which is going to be an issue for banks. However, small-balance commercial mortgage lenders will be willing to listen to your borrowers’ stories. If your borrower can satisfactorily explain what caused the credit issues and prove that they have been resolved or that this loan will help rebuild their credit, you’ll be in good shape.

Your borrower has IRS debt.

Banks will not lend to borrowers who owe money to the IRS. Small-balance commercial lenders, though, are more flexible. If your borrower can give a good explanation as to the reason for their tax debt, a non-conforming lender may be able to help.

Your borrower has issues verifying their income.

Banks have strict regulations when it comes to verifying a borrower’s income in order to make sure they can repay the loan. If your borrower cannot prove their income through traditional means, such as tax returns, a small-balance commercial lender is probably the best bet.

Your borrower needs the money fast.

If your borrower needs funds to pay off a quickly ballooning mortgage, take advantage of a great deal on inventory or purchase a property fast, a bank loan is likely not the answer. Commercial mortgages can take months to close if you seek bank financing. This is a case where a non-conforming commercial mortgage is probably the best solution for your borrower.

As a commercial mortgage broker, it’s your job to understand the kind of mortgages for which your borrowers can qualify. There’s a very good chance that you’ll run into non-bankable borrowers who require financing, and knowing where to place these borrowers means more closed loans and additional income.

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