There are many factors that a small-balance commercial mortgage lender takes into account when reviewing a borrower’s request to refinance their property. One of the most important pieces of information your lender will need to make their decision is the use of funds. Knowing how your borrower plans to use the money allows the small-balance commercial lender to determine if the mortgage makes sense for all parties.
Here are some common reasons your borrower might be looking to refinance:
Pay off existing mortgage:
For small business owners, there are two very common scenarios that lead them to refinance with a small-balance commercial lender in order to pay off a mortgage. The first is that the bank has called their note due and it will balloon in the near future, so a quick solution is crucial. The second is that they’re looking to pay off a hard money loan while securing a lower rate and better terms. Either way, the lender will need to know the details.
Many small business owners are interested in paying down some of their debt when they refinance. They might be looking to, consolidate business credit card debt, pay down their monthly expenses or pay off the IRS. As the broker, you need to find out the nature of your borrower’s debt and relay that information to the lender.
Another reason your commercial borrower might be refinancing their property is that they need working capital. Reasons for this range from taking advantage of a great deal they found on inventory for their business to needing money in the bank to cover bills while they wait for receivables. Find out the reason they need the working capital and tell your lender.
Another common reason for small business owners to refinance is to make improvements to their building. Whether it’s fixing the roof, repaving their property’s parking lot or another type of small improvement, it’s important to talk to your borrower about what they’d like to accomplish. Make sure your borrower gets an estimate and a tentative schedule for the work.
The reason your borrower needs to refinance their property is an important factor in a small-balance commercial mortgage lender’s decision. If it doesn’t make sense to your lender, or if the lender hasn’t been provided with all the necessary details, your borrower is going to have a hard time refinancing. Asking your borrower about why they need financing and providing that information to your lender will help your borrower to obtain the small-balance commercial mortgage they need smoothly and quickly.