Gary Bechtel is president of Money360, where he is
responsible for developing and executing the company’s
expansion strategy. A direct lender, Money360 offers
borrowers speed, convenience and reasonable terms,
while offering investors direct access to attractive fixed-income investments secured with a first-priority lien against
income-producing commercial real estate. Investors range
from institutional investors to high net worth, accredited
individuals seeking better risk-adjusted returns than those
offered by traditional fixed-income investment vehicles.
For more information, visit money360.com. Reach Bechtel
Capitalize on the Alternatives
Nonbank lenders are a growing source of capital for commercial real estate deals
By Gary Bechtel
There continues to be strong demand for capital within the commercial real estate sector. This past second quarter, the vol- ume of industrial loans was up 91 percent
year over year, while loan volume for office properties
was up by 33 percent over the same period, according
to the Mortgage Bankers Association.
Compared with this past first quarter, loan originations
this past second quarter for both industrial and office
properties were up by 39 percent. That was driven,
in part, by the high demand for investment options
backed by commercial real estate (CRE) loans, such as
commercial mortgage-backed securities (CMBS), which
recorded a 117 percent increase in dollar volume during
This surge in CRE demand should continue for the
foreseeable future. The demand is being driven by
historically low interest rates, a robust economy and
strong employment numbers boosting investment
across the country.
Mortgage brokers and borrowers looking for a commercial lender have several options in today’s market.
They range from banks, to online platforms, to
CRE loans have typically been funded by traditional
lenders, such as banks, life insurance companies, CMBS
lenders, Fannie Mae, Freddie Mac, the U. S. Department
of Housing and Urban Development, and pension
funds. These loans, however, are increasingly under the
purview of alternative lenders, which have stepped in
over the past few years to fill the funding gap in the
CRE market and provide capital to borrowers no longer
served by the traditional funding sources.
These nonbank lenders have grown in popularity
following the implementation of financial regulations
such as the Dodd-Frank Act and Basel III risk-capital
rules — which imposed stringent capital requirements
on big banks and made lending into a less-profitable
activity. As a result, banks tend to be focused on only
the most lucrative commercial real estate projects
and larger, more substantial borrowers, forcing smaller borrowers and borrowers in second- and third-tier
markets to look elsewhere for capital.
Alternative lenders offer several advantages over
traditional banks when it comes to securing a CRE
loan. Not all alternative lenders are the same, however.
For brokers and borrowers who are eager to explore
the CRE market via nontraditional lenders, it’s important to understand the lay of the land.
Technology has transformed how CRE loans are made,
with many alternative lenders now embracing tech-
nology to make the borrowing process easier, fast-
er and more transparent. Instead of waiting weeks
or even months for a bank to make a decision on a
loan application, for example, borrowers using tech-
enabled alternative lenders can often apply in just 10
minutes and receive a decision in as little as 24 to 48
hours. These time savings can be critical for a borrower
facing a deadline or several competing bids for a project.
Another advantage of technology-based platforms
is that they often include online deal trackers or managers, allowing brokers and borrowers to see the real-time
status of their loans. This leads to an improved customer
experience and more flexibility should a borrower
have to explore other options.
While technology plays a big role in optimizing
the commercial lending process, experts in the CRE
market know that each loan decision still requires a
human element. An algorithm will never be able to
understand all the nuances that go into underwriting
a commercial property. That’s why it’s so important
for brokers and borrowers to carefully vet each lender’s underwriting practices, and the experience and
expertise of a lender’s team.
The most successful alternative lenders are those
that can combine technology, especially for an initial
applicant screening, with a dedicated team that has
decades of experience underwriting and structuring
CRE loans. This dual track is key to making sure that each
borrower receives a loan offer that is tailored to their
particular circumstances, increasing the likelihood that
the loan is repaid and that the lender recovers its capital.
Not all alternative lenders are created equal. In general,
an alternative lender is either a direct lender, meaning
it makes loans directly from its balance sheet, or it is a
crowdfunding platform — meaning it aggregates capital
from a combination of institutional and retail investors.
While both business models have their merits, direct
lenders are becoming an increasingly popular choice
for commercial mortgage brokers and borrowers who
want to eliminate the middle man and work directly
with a lender to facilitate a deal.
In an industry where getting a deal done on time is
of utmost importance, direct lenders can help provide
an added level of certainty that a transaction will be
completed, rather than potentially having to wait days
or weeks for a deal to get funded by outside investors,
each of whom has their own agenda.
Direct lenders also tend to have more flexibility
when it comes to structuring a deal, given they do
not face the same stringent regulatory requirements
as traditional banks. This flexibility provides mortgage
brokers with an opportunity to customize each deal to
n n n
Commercial real estate loans continue to be in high
demand for brokers and borrowers across the country,
and alternative lenders have increasingly emerged as
the go-to source for capital. Mortgage brokers interested in or new to the CRE market should take the
time to understand the different lending options and
act accordingly. n
For more articles on alternative lenders
View these articles and more at
“Fintech Is Bridging the Gap,”
Evan Gentry, June 2017
“Find the Best Alternative,”
Mark Fogel, February 2017
“The Search for a Better Loan,”
Michael Boggiano, January 2017
“Online Lenders Tout Speed and Convenience”
David Manshoory, October 2015