One of the most common challenges every commercial broker faces is selling alternative, small-balance mortgages to non-bankable borrowers. If your clients went into the process expecting bank rates and terms, it becomes even more difficult.
The best way to sell small-balance commercial mortgages is to explain from the beginning about the type of loan your borrower is more likely to qualify, and then sell that loan as a tool your borrower needs to accomplish their goals.
To do that, you need to find out why they need the mortgage. Here are the most common reasons:
Paying off debts
The majority of small business owners have accrued a decent amount of debt, and past financial issues or the nature of that debt (such as tax debt) might keep them from obtaining a bank loan. A non-conforming commercial mortgage from a small-balance lender will come with a higher rate than a bank loan would, but it will give your borrower a chance to pay down their debts and improve their business’s financial situation.
Improving an existing property or purchasing a new one
A common goal for many small business owners is to have work done on a property they already own or purchasing a commercial building. Either way, a small-balance commercial mortgage can help them to achieve either of these objectives quickly. Non-bankable borrowers might be reluctant to go with a non-conforming lender because of higher rates, but it’s your job as the broker to help them understand that this type of mortgage will likely be their best bet.
Injecting cash into the business
It’s not unusual for a small business owner to require some extra money to take advantage of great deals on business essentials or to cover their bills while they wait for receivables. For some borrowers, they won’t be able to obtain this loan from the bank, so it’s important to sell a non-conforming commercial mortgage as a means to accomplish whatever goal your borrower has in mind.
Buying equipment or inventory
Another reason your non-bankable borrower might need a commercial mortgage is to purchase equipment or inventory their business needs. If this is the case, keep your borrower focused on their business’s needs when selling a small-balance commercial mortgage.
Whether your non-bankable borrower is looking to improve or purchase a building, inject some cash into their business, buy business essentials or simply pay down their debts, you need to sell the small-balance commercial mortgage as a tool. Keep your borrower focused on their goals and how the mortgage will help them achieve those objectives, and you’ll start closing more deals and earning additional income.