Peter Pays Paul

Very few independent commercial mortgage brokers take the time to interview the lenders on their lenders list. Here are three reasons you should interview your commercial lending sources.

1) It Saves Time.

Commercial brokers will see a variety of deals come across their desk. Instead of calling 100 lenders to find out if they finance retail properties when the deal arrives, a broker can call the 10 lenders that are looking for retail properties to finance. It also allows you to collect the necessary information to accurately present the deal to the commercial lender.

It also saves the lender’s time. You do not end up calling them every five days with a deal that cannot be financed by their institution.

2) It Increases Perceived Professionalism.

We all want to be taken seriously and perceived as professionals in our field. You can appear more professional by consistently calling a lender with deals that are appealing to that lending institution.

A husband knows that his wife likes daisies, is going to score more points for bringing home daisies than petunias. Showing apartment loans to a lender that likes apartment loans, demonstrates that you listened to the lender and are serious about getting deals done with them.

3) It Increases Successful Closes.

Fewer wasted phone calls and a focused plan of attack allow you to devote more time to deal producing activities.

As lenders begin to trust you with the deals that you bring to them, they look forward to working with a person they know and trust. Marginal deals are more likely to get funded if the lender has a relationship with you.

This process also allows you to filter out the deals that you can’t readily place with any lender. This will save you from wasting precious days chasing a deal that is not able to be financed.

I hope you enjoyed my two cents on why you should develop a relationship with your commercial lender. Can you think of other reasons to develop a relationship of this type?

Commercial mortgage brokers would do well to take 15 minutes to get acquainted with the lenders on their lender list. While a rate sheet and lending matrix can be helpful, nothing beats a phone or face-to-face interview.

Here are nine questions that will allow a commercial broker to focus their efforts and to target properties to the right lenders.

1. What are your minimum and maximum loan amounts? - Calling a lender with a deal that is either too big or too small is a waste of your time and theirs.
2. Do you have a geographical limitation? – Some lenders can only lend in certain metropolitan areas. A loan outside of these areas is an automatic “No”.
3. What property types do you prefer? – You don’t want to take a loan on an auto body shop to a company that only finances apartments.
4. How long does your average loan take to close? What is the shortest amount of time you have personally seen a deal close? – This is very important to ask if you are dealing with 1031 exchange properties. It can help you weed out lenders for deals that need to close quickly.
5. What is your maximum loan-to-value ratio? – This helps you to eliminate lenders that cannot provide the leverage your borrower needs.
6. What is your minimum debt-service coverage ratio? – Along with the question above this helps you to determine the amount your client can borrow based on the properties income.
7. What information do you require from the borrower in a loan package? – It is frustrating for a lender to receive a trickle of information about a loan over a period of days, weeks, or months. Knowing beforehand what a lender needs, you can  assembled all the necessary documents before you send it to the lender for review and hopefully a quick answer or LOI.
8. What is the best way to contact you if I have a deal? – Contacting the lender through their preferred method shows a deference to working on the lender’s terms. It shows that you want to make things easy for them, not yourself.
9. What loans are you the most competitive on? – Sometimes lenders will tell you that they will lend on a certain type of property, and they probably will. However, the rate, LTV, or DSCR will make it practically impossible to get a loan from them. This question helps to narrow the scope to only the properties they can offer competitive financing for.

These are my nine suggested questions to ask your commercial lender. Do you have any others that you would recommend?