Dos and Don’ts for Surviving a Lenders’ Market
There still is worthwhile funding out there for brokers who can approach lenders effectively
By Jerry Sager, senior managing director, First National of America
Although commercial mortgage brokers now face a lenders’
market, good loans are still finding financing. Lenders may be more cautious in the deals they choose to fund, but
you still can attain funding if you seek the
correct type of lender, approach it properly, present the property well and manage clients’ expectations. If your clients’
business and property are viable, they will
always be attractive to lenders regardless
of economic tides.
There are some tips you can follow to
continue to place loans in this environment. Implementing some best practices
will help you place loans now and also
could improve your workflow once the
tides turn. Learning how to talk the lenders’ talk and anticipating their informational needs can improve the chances that
they will consider your transaction. Doing
so also can expedite the loan process.
Here are some general rules to adopt to
survive in this environment.
■ Don’t call a lender if you don’t have all
the facts about the property or if you are
ill-prepared to discuss the deal’s details in
a preliminary call. Do make sure that you
have all the facts and numbers in front of
you during the conversation. This could
include the profit-and-loss statement, balance sheet, business plan, operating history
and any other documentation your client
has given you.
■ Don’t overshop the loan. Do research
and seek specialized lenders that focus on
the type of property you are attempting
to place. Specialized lenders are experts
in their asset classes and will know all the
nuances and pitfalls of a particular property type. In addition, finding a specialized
Jerry Sager is senior managing director of First National of America, a leading principal lender to golf course owners. With more than 20 years of history
of lending to golf course owners and management companies, First National
provides financing for the acquisition, construction, expansion and refinancing
of golf courses throughout the United States. Contact Sager at (908) 604-4700
or firstname.lastname@example.org. Find additional information about First National at www.
lender will save you the time and effort of
having to educate a general commercial
lender about your clients’ specific debt needs
in their asset class. You also will minimize
the risk that a banker will value the property
incorrectly and will evaluate only the real
estate value without considering the potential operation’s enterprise value.
■ Don’t mislead, manipulate or oversell
lenders or your clients. Expect lenders to
perform thorough due diligence. Exaggerating will affect your credibility and potentially an efficient closing. Do provide lenders
with a realistic overview of the property
and of your client’s background and business. Your objective should be to develop
a long-term, professional relationship with
the lender and your clients.
■ Don’t let too much time pass after your
conversation with the lender before following up. Do follow up promptly and forward
all documentation you have discussed. The
impetus is on you to forward the information,
not on the lender to follow up with you.
■ Don’t have unrealistic expectations in
this economic environment. Do educate
yourself and your borrowers about key lending parameters used for that transaction
type. Manage your clients’ expectations.
Present your transaction in a way that shows
the lender how the loan makes sense from
an economic and credit perspective.
■ Don’t be overly protective of borrowers.
Do understand that lenders will need direct
contact with borrowers — particularly with
respect to specialty loans — to assess their
experience, business plan and financial
■ Don’t pressure the lender or have expectations for unrealistic time frames for
closing a transaction. Do trust your lender.
Recognize that it relies on the borrowers and
third parties for information. The lender’s
progress typically is based on the timing and
quality of the information provided.
Although following these best practices
will not necessarily guarantee loan placement, they are solid principles to follow in
all credit environments. Following them
likely will improve your chances of a successful closing.
Remember: Although lenders’ guidelines, including debt-coverage and loan-to-value ratios, may seem more stringent in
this marketplace, their due-diligence practices have most likely not wavered.
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