Need less than $2M – don’t go to a bank (or a broker)

After 1,138 calls this year I can confirm that if you need less than $2,000,000 for a commercial mortgage or a business loan don’t call a bank and don’t
bother calling a broker – unless you know what you are looking for. The broker you talk to might only know a few lenders with limited options and the banker you talk to may not know how to handle your request properly if you can’t be specific about your need.  There is a very limited market of people that can help borrowers looking for less than $2,000,000.

Today I had a conversation over email with an individual purchasing his first multi-unit investment property. Here are the highlights of the questions that pretty much capture the challenge for individuals borrowing less than $2,000,000:

– why did my real estate agent pick a closing date that doesn’t give me enough time to figure out if I can get financing?
– don’t banks pay commissions to brokers for arranging a commercial mortgage?
– if my down payment is more will my interest rate be less?
– a bank will have conditions that need to be met? are these the same as the conditions in my real estate contract?

The questions are good questions – however the individual was already committed to a transaction with a signed purchase agreement. Wrong time to be asking these questions. It’s a waste of their time and everyone else that is involved.

If you need less than $2,000,000 for a commercial mortgage or a business loan, do your homework first. Know your credit score, know your net worth, know how much income is available to pay for the debt and understand what kind of lender is able to do your deal based on what you have to work with.

For more than 15 years I have listened to people tell their story about the financing they need. We have used our Deal Review to help borrowers learn what they can afford and what will be involved in getting financing before they commit to a borrowing decision. There’s no point in talking to a bank or a broker if you don’t know what you are looking for.

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