For brokers closing commercial mortgages, it’s not unusual to work with small business owners who don’t qualify for a bank loan. Once a borrower is turned down by the bank, they often assume there are no good options left and are wary of non-conforming commercial mortgage lenders.
As their broker, it’s your job to find them the best deal possible and to explain why alternative commercial mortgages are nothing to be afraid of. Here’s how you can do that:
Explain what type of mortgage for which they’ll likely qualify and why.
Part of the fear of alternative commercial financing stems from the fact that many small business owners simply don’t know what to expect. They’re turning to you because you’re an industry expert who can point them in the right direction and guide them through the process. Take the time to explain why they can’t qualify for a bank loan, the kinds of rates and terms they can expect from alternative commercial lenders given their particular financial situation and answer any questions they might have.
Emphasize the positive aspects of an alternative commercial mortgage.
More often than not, the biggest issue borrowers have with a non-conforming mortgage is the rate. If your borrower was expecting or hoping for a bank rate, they might be experiencing a little bit of sticker shock. In these instances, it’s important to direct their focus to the positives of the deal. Sure, the rate might be a little higher than they’d anticipated, but maybe it’s a fixed rate that ensures consistent monthly payments. Perhaps it’s going to close in a matter of weeks or the lender got them a great deal on an appraisal. Or maybe they don’t need to worry about a balloon payment in the next couple of years because the deal is fully-amortized over a longer period. These are all positives you can emphasize to the borrower.
Keep your borrower focused on their business goals.
At the end of the day, your commercial borrower needs this money in order to achieve some sort of goal for their business. Whether it’s paying off their debts, refinancing for a more stable rate, property improvements or purchasing a commercial building, make sure you keep them focused on what they’re looking to accomplish. Sometimes a reminder that this money will allow them to improve their financial situation or their business is all it takes to get your borrower to the closing table.
Provide them with some options.
Sometimes, a borrower’s fear after being turned down by the bank simply stems from feeling like they don’t have any options. Do your best to provide them with a few choices when it comes to rates and terms so that your borrower feels that they have more control over this decision.
Being turned down by the bank is certainly a disappointment for many commercial mortgage borrowers, but it doesn’t need to be scary. As their broker, you can help them through the process of obtaining alternative financing by keeping them informed about what to expect, emphasize the positives of the deals for which they qualify, keeping them focused on their goals and providing a number of financing options. Do your best to give them peace of mine, and you’re likely to run into fewer challenges and close more deals.