If you’re in the business of closing small-balance commercial mortgages, you’re going to come across non-bankable borrowers who need financing. As a commercial mortgage broker, you need to know what to do when your borrower is turned down by their local bank. While there are plenty of hard money options, there are some borrowers who are going to qualify for better alternative lending options. This is when it pays to work with a small-balance commercial mortgage lender. So, how do you know when a small-balance commercial lender is right for your borrower?
Your borrower has had credit issues in the past which have since been resolved.
Credit issues are not uncommon among small business owners. While their credit score may reflect medical or credit card lates, there are many potential borrowers who have managed to pay their mortgage and keep their business running while trying to resolve these financial issues. While banks need to remain within their credit box, a small-balance commercial mortgage lender will be more willing to understand your borrower’s situation. Make sure to submit a credit explanation with the loan scenario if you’re working with a borrower like this.
Your borrower does not claim all of their income or has had problems with the IRS.
If you’re working with a borrower who doesn’t report all of their income when they file their taxes, it’s going to be incredibly difficult to obtain traditional financing for them. However, there are alternative lenders who are willing to lend based off of your borrower’s stated income and the value of the collateral. Likewise, if your borrower is behind on their taxes, a bank loan is out of the question. Small-balance commercial lenders will listen to your borrower’s story and can often help them pay off the IRS and put their tax issues behind them.
Time is of the essence.
If your borrower needs cash fast, a bank loan is going to be an issue as those take more time to process. While a hard money lender can get your borrower the funds they need quickly, a small-balance commercial mortgage lender can generally close loans quickly. When you have a good borrower who needs their mortgage to close quickly, these non-conforming lenders are often a great solution.
Credit issues, tax issues and a short time frame are all various issues that many potential borrowers have to contend with. However, small-balance commercial mortgage lenders can look past these issues and find a way to work with your borrower. These lenders offer a great solution for many borrowers and a great outlet for mortgage brokers looking to close more loans.