 Small Balance Lending, Commercial Lending, Commercial LenderMonday, November 12, 2007 - Article by: Lance Cutsforth -
There is a huge misconception that commercial real estate lending - especially the small-balance stuff - is either: 1) being ignored by regular banks or underwritten and stipped to the point of impossibility; 2) only serviced by hard-money lenders who are perceived to be vultures ready to pick the meat off of the bones of your borrower; 3) so brain-draining to close with anyone that it is not worth the time, effort, Advil, Mylanta, therapy, etc. to make it worthwhile. These perceptions are just not true in today's market! Fear of the unknown, or the circulation of a few horror stories, makes this realm of business seem unapproachable. Remember the stories that circulated when we were kids about eating Pop Rocks and drinking soda at the same time? You would explode, right? Sure - there was a kid in the next town over that died from it, but the soda company paid off the family so that is why it never hit the paper... See where I am going with this? Please understand, I am not a commercial lender and I am not trying to push loan programs. Our company provides commercial real estate loan closing doc solutions to commercial lenders, so we definitely have our pulse on who is operating in the small-balance ($100K-$25MM) arena, what type of programs are out there, the kind of volume they are doing, who is table funding, who is accepting broker deals, and what combinations work. We had one client who had an incredible machine operating prior to being pulled into the subprime vortex. They had a commercial lending cell as a part of their subprime division. Their residential brokers mined for business from their customers and were able to generate about 50% of the business for the commercial group - mainly o/o commercial structures, self-storage, small strip centers, small apartment complexes, etc. Unfortunately, the commercial cell was tied to the subprime group, so when the mother ship went down, it took the highly-profitable commercial group with it. For all of you residential loan brokers out there who have lost volume recently, you could use this same cross-marketing approach to generate more business (minus going down with the mother ship) for yourself!! A lot of your clients have small commercial dabblings, and you can very easily scoop that business if you make them aware you are able! If you have gained their trust in a situation as intimate as providing financing for their personal residence, you have a huge open door in front of you! |
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