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Increased specialization, the need for speed and a marketplace that wants changes in customer experiences are among the many factors impacting the commercial real estate industry. In that fast-pace, changing environment, there are few businesses
more risk averse than banks, which often means they
can be slow to embrace innovative deals.
Conservative bankers at big institutions prefer to bet
on sure things, and most entrepreneurs are not in this
category. Too often, bankers aren’t concerned about
helping business owners achieve their dreams. It is the
commercial mortgage broker’s job, on the other hand,
to do just that as part of their service to clients.
Commercial mortgage brokers often say they like
working with nonbank lenders that are straight talkers
and don’t string along deals. When a nonbank lender
turns down a deal, they usually do it quickly, and they
give a reason why.
Start with specialization
Big banks constantly need to grow to satisfy shareholders. They frequently accomplish this by adding new
products and services, and by building interconnected
business relationships with their clients. Banks want
your business checking account and line of credit, your
personal savings account and home mortgage loan, as
well as your boat loan and maybe even a shot at your
Banks also may want a business owner to provide
an inside line to their employees, too, to sell them the
same products. Commercial real estate lending sits
somewhere in the midst of these various offerings.
Many banks and credit unions will only do a handful of
commercial real estate loans per year, and the requests
that are funded may involve doing favors for those who
are funneling a lot of other business toward the bank.
Nonbank lenders, in contrast, often focus on one or
two niches or areas of specialization. A nonbank lender
will complete dozens, if not hundreds, of transactions
per year and builds unmatched experience after seeing it all in the world of commercial real estate finance.
When you consider that many business owners only
buy a property once or twice in their careers — and
it might be the biggest purchase they ever make —
specialization is crucial in these instances.
Get up to speed
Another area of distinction is speed. With respect to
the typical bank description and the banker who is
earning fees on several existing accounts, there is little
incentive to get your commercial real estate deal done
quickly. Sure, the bank can make money, but no reason
exists to fund the request quickly.
In fact, for the borrower, the opposite is likely true.
Banks are traditionally conservative and want to be
sure your proposal is an ideal match for their lending
criteria. Further, some banks and credit unions still
operate under a loan-committee model that forces
their clients to wait as long as a month for a decision
— or longer if they have questions that need answers.
The nonbank business model is completely different.
Nonbank lenders don’t get paid until a deal closes, so
urgency and speed are paramount. Since they are not
drawing fees from any existing bank accounts, they are
incentivized to complete a deal. They are not doing a
deal as a favor and will analyze a transaction as quickly
as possible because it is in their best interest — and
that of the borrower.
Interact and simplify
“Customer experience” is a popular catchphrase of late,
but how nonbank lenders interact with mortgage
brokers and borrowers will always be critical in commercial real estate finance. As previously mentioned,
the traditional banking relationship has changed.
Many in Generation Z — those born after millennials
— will step into a bank branch to open an account but
will likely never know their banker. It is not just young
people who expect financial-services professionals to
cater to them. Business owners of every stripe demand
both speed and a high level of service.
Today’s commercial mortgage borrower wants the
transaction to be as simple as possible. Nonbanks are
competing in a marketplace where huge numbers of
transactions that previously required human interaction can now be managed with an app. While we may
be a few years away from buying a property without
using a desktop computer or a scanner, those days are
“Nonbank lenders don’t get paid
until a deal closes, so urgency and
speed are paramount.”