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segment, exit strategy and any other pertinent information. The immediate
objective is to provide an overview of the scope of the entire undertaking.
Despite the fact that these seem like very specific questions, the logic
behind asking them is to create a big picture of the overall project, as opposed to focusing narrowly on the specific loan type that the borrower may
believe best serves the purpose. In other words, the mortgage broker and
borrower should not concentrate on securing a specific type of financing
because there may be a more feasible alternative that is less costly or is
more suitable for the borrower’s long-term financial objectives.
Know the options
Obviously, there will be times when a borrower or project are limited to
certain types of financing, but there will also be opportunities for lenders
to exercise creative, single solutions to multiple financing requirements.
A lender, for example, could finance a construction loan that automatically
converts to a permanent loan after a given length of time, or when the
property reaches a predetermined occupancy or stabilization level.
This strategy would eliminate the probability of having to acquire a short-term construction loan, followed by a bridge loan and permanent financing,
each of which requires separate fees and, possibly, a balloon payment.
Conversely, a single-loan option may be structured to fully amortize and
have much lower interest rates over a longer term.
There are enough choices currently available that even lenders with limited
options may have associations or quasi-partner arrangements with other
lenders who will cover the next phase of financing with minimal costs and
favorable exit strategies, terms or rates. Many commercial mortgage brokers
and borrowers may consider the above scenario to have near-utopian
standards, but all that is required to position yourself to take advantage of
these and similar opportunities is the development of strong, direct business
relationships with various funding sources.
Your project and/or principal may be the catalyst for a lender to exercise
creativity that was previously not considered. The lender has a primary goal
— achieving a return on their investment. New methods or different types
of investing do not alter that objective.
From the commercial mortgage broker’s perspective, these relationships
can lead to a continuous stream of business because of newfound alliances
and abilities to offer unique solutions for your clients’ funding needs. The
only necessary requirement is to take the time to identify, research and
communicate with these funding sources prior to introducing them to
Borrowers also can benefit by receiving potential interest rate and fee
reductions for future business, as well as quick, simple, less costly and more
dependable financing for the entire life cycles of their projects. The only
additional investment on their end is the time and patience required to
identify and cooperate with the broker and lender, who can structure the
transaction in a fundamentally strategic manner.
n n n
All in all, commercial mortgage brokers stand to benefit economically on a
personal financial level — and in an industrywide developmental manner —
because of the limitations that have been imposed on traditional banks and
other conventional funding sources. Initially, this era seemed to signal that
financing would be restricted indefinitely. The opposite has transpired,
however, and commercial real estate professionals are now free to expand
their business functionality beyond what they imagined just a few years ago. n
Milton Franklin is founder and president of Commercial Mortgage Exchange
Inc. (CME), which maintains direct relationships with multiple private and
nonconforming funding sources. CME offers a range of creative financing
products for clients and partnering opportunities for commercial mortgage
brokers. Franklin is a graduate of the Wharton Business School and has 34
years of experience in financial services. Reach Franklin at (305) 804-7504 or
“There may be a more
feasible alternative that is
less costly or is more suitable
for the borrower’s long-term