How is your borrower planning to use the money? It’s an important question that small-balance commercial mortgage lenders will ask, and as a broker, you need to be able to answer it. Knowing and understanding your borrower’s use of funds will help you and the lender determine if the commercial mortgage makes sense for all parties involved.
Here are some common reasons borrowers are seeking small-balance commercial mortgages:
For many small business owners, purchasing property is an important goal. Whether your borrower is looking to buy the building they currently rent or purchase new property to expand their business, your lender will need to know.
Your borrower may be seeking financing for working capital so that they can take advantage of a good deal on inventory, pay down business expenses while waiting for receivables, or purchase a piece of equipment for their business. Make sure you get the details before submitting the scenario.
Another common reason borrowers need small-balance commercial mortgages is to make improvements to their building. Whether it’s repairing the roof, repaving the parking lot, a new coat of paint, or a new HVAC system, make sure you know what the borrower will be using the money for and get cost estimates for the lender.
If your borrower is looking to refinance, debt consolidation is a common reason. Say your borrower has a mortgage on the property, credit card debt related to the business and some tax debt. Consolidating that debt into on monthly payment frees up cash and makes their life simpler. Make sure you understand the nature of your borrower’s debt and relay this information to your lender.
Whether your borrower is looking to purchase a property, use the funds for working capital, make improvements to their property or consolidate their debt, your small-balance commercial mortgage lender will need to know. Understanding your borrower’s needs will allow the process to flow more smoothly and the loan to close more quickly.