7 Realities of Commercial Lending

7 Realities of Commercial Lending

1) Nothing is set in stone! Although commercial loans are based on the statistical mathematical equations that deal with whether or not the client will be able to consistently make his mortgage payment. It is also based on how the lender feels about the project. What I mean by feels is feelings, gut feelings, did they have a bad experience with that particular industry, and so on. Before submitting a file make sure it is the type of project and industry the lender likes to lend on. (i.e. I know several lenders that do not want to lend on bars or adult entertainment, and many don’t want churches)

2) Lenders do not tolerate incompetence. If your deal comes in and has holes, gaps, inconsistencies, they will turn it down and next thing you know is that you are on their special list, and the list is usually not a good one. Answer: know the lender, their processes and their guidelines.

3) Lenders are much like brokers, if the deal sounds tantalizing they may quote you a high LTV, but when it gets into their office be sure the will hack it up according to any issues that pop up. So, make sure to let your client know that the LTV is based off of best case scenario less any issues that may arise.

4) The lender usually likes to see the following when submitting a loan, even when just emailing them a scenario; Property type, Loan amount, Type of transaction Borrower Information, use of proceeds, any upfront concerns you may have about the project. (Basically: your don’t have to give them latitude and longitude to get to your house, but you do have to give them clear enough directions to get them to your front door.)

5) No B.S. please! The lenders do not want to see any fluff, just the facts. Does it make financial sense? Pretend you are lending your own money, what would you like to see? What would turn you off if you found out? (make sure to address any major turn offs and answer why)

6) Show yourself the profession by knowing their process, if the timeline the lender gave you is not on track, ask for a updated timeline. Commercial loans are not rushed. If you want rushed get hard money and be prepared to pay the price.

7) Do not send TIME WASTER loans to the lender, you will get on their bad side, they are in it to make money, not sift through garbage. Make sure you have a clean well organized file that fits their guidelines and process.

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I have never worked in the lending industry: to be honest I was intimidated by it. I thought that it would take years to even begin to understand the procedures that are involved. I finally decided to attend a class taught by Mickey O’Brien from www.CommercialTrainers.com He took commercial loan topics and explained them in detail, but in such a way that everyone was able to understand them. I learned to fund and plan on taking the four day live class that CommercialTrainers.com offers in the near future.

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Andrew Korzeniewski