Myth #1: Commercial lending is hard because of all the paperwork and calculations.
Commercial lending requires no more effort than a basic home refi. All you need to do is complete a 1003, or any proprietary application form, for all the owners or stockholders of the property. There are many lenders that will look at a deal with nothing more than an application, a credit report and a few sentences about the Borrower’s request.
Myth #2: Commercial lending is time consuming.
If you focus on Small Balance Commercial lending you’ll find that a number of lenders will do all the processing for you. This means you submit you deal, quote the terms and let the lender do the rest. By working with lenders that do the processing you can go back to your “bread and butter”, residential transactions.
Myth #3: Commercial lenders only do “big” deals.
There are a handful of lenders who do “Small Balance” commercial mortgages. These are loans up to $1mm. There are some companies that will do loans as small as $25,000. A lender that truly focuses on small balance will let you do deals from $25,000 and up, so you can meet the needs of all the selfemployed individuals you have ever serviced.
Myth #4: As a Residential Broker, I won’t be able to find commercial deals.
Commercial loans come from the same people you do refinance and purchase mortgages for. Every self-employed borrower who has ever relied on you to finance their home is a potential refi or purchase borrower on a commercial property. Every accountant and lawyer you ever worked with may be a referral source for their self-employed customers. Every realtor you work with sells or has someone in their office who sells commercial and mixed-use properties. These are all easy referral sources. All you need to do is let them know that you do commercial loans.
Myth #5: Commercial lenders are only interested in financing “A” borrowers and “A” buildings.
Just like in residential lending the commercial marketplace has a variety of lenders. There are lenders that only like “A” deals, but there are others who understand that not every deal is “cream”. You may want to develop a relationship with several companies, just like your residential business. Make sure that one of the lenders is a source that is flexible and will listen to you borrower’s story. When you are financing the local businesses in your community, not all of them are going to be “A”. You will need a non-traditional lender, one that understands the kind of customers you will develop. Make sure that you know your lender. A company that offers training on commercial lending, webinars and a personal relationship will really make the process simple.
We hope these tips help!
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