Each year, many borrowers with commercial mortgages face balloon payments coming due. As a commercial mortgage broker, you’re likely to serve some clients who are looking to refinance their small commercial mortgages in order to pay off a bank loan. Banks generally re-evaluate commercial mortgages every five to ten years, and they can either renew a borrower’s loan or they can ask the borrower to pay off the mortgage.
If you’re a commercial broker working with borrowers looking to pay off traditional commercial mortgages, a small commercial mortgage lender might be able to help. Many of these lenders are willing to work with borrowers who have less than stellar credit, and often have a lot of experience working with small-business owners. Most small commercial mortgage lenders don’t require much in the way of paperwork. To submit a loan scenario, you’ll need:
- An executive summary: Be sure to include basic information about your borrower, his or her business, the property and the use of funds.
- A 1003 or personal financial statement: Having your borrower fill out one of these documents provides a small commercial mortgage lender with the financial information it needs to assess your borrower’s situation.
- A tri-merge credit report: A borrower’s credit report and credit scores are key factors in any small commercial mortgage lender’s financing decision. Be sure you and your borrower understand and can discuss the report and scores and any financial issues your borrower has had in the past.
Though the economy is doing better, growth remains slow, and banks aren’t as likely to take risks on commercial loans as they once were. While many small business owners have managed to build their credit back to its pre-recession level, others continue to struggle to meet the banks’ credit standards. If any of your borrowers are facing a balloon payment, looking into refinancing with a small commercial mortgage lender could be a great solution.