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Loan Inquiries that Get Results

Whether you are a borrower or broker, you need to make meaningful inquiries with commercial lenders that get you the answers you need quickly. Here’s the “what to do” and “what not to do” of making a loan inquiry. 

Why make an inquiry first?

We are all busy people. No one likes to waste their own time. Before you make a presentation to a lender for funding, you should first find out if this is a commercial real estate lender that could fit your needs. Not every commercial lender does every type of commercial loan. Most have their preferences, strengths, specialty programs, and areas of interest.

What are your needs?

In order to make a meaningful request, you first have to know what your needs are. What are your needs? The answer depends on your situation. Are you buying a property on a tight time frame? Refinancing and need cash out? Building a new commercial project? Within each major category, there are different nuances. Make sure you identify all of your “hot buttons” so that you can succinctly inform the lender or broker you are working with. Usually, these key considerations come down to:

  • Loan to value, or alternately, how much money you have to bring to the table to close.  If you are looking to bring in as little cash as possible, you need a high LTV loan.
  • Time frame to close. If you need to close quickly, you are likely going to use hard money (or a bridge loan) to get to the closing table quickly. These loans generally have higher interest rates and origination costs, but are easy go get out of when you are ready to refinance.
  • Low monthly payments. To get the lowest monthly payments, you need a combination of low interest rate, long amortization period and/or relatively low LTV. Conventional loans (CMBS) or Agency Loans (HUD, Fannie Mae, Freddie Mac, SBA, etc.)  generally offer the lowest payments, but take the longest to close.
  • Loan to Cost (LTC) in a construction loan. If you are building ground-up, you can expect to contribute to the overall project cost. The question is, how much?  Some lenders allow you to count all the money you’ve already invested and they’ll fund the rest; others require you to contribute at each draw request throughout the project. One scenario costs more than the other. Do you know which?

What are your priorities?

Sometimes borrower’s have conflicting needs. For example, quite commonly, we get requests for 80% (or higher) LTV, low interest rates, minimal origination costs and a fast close. While each is possible in a specific scenario, I can promise you I can’t get you all of those characteristics in one loan. So, what’s the most important to you?

  • Case Study #1: Client needs quick close. Here’s an owner-occupied property that needs a quick close, and the lender can close in 2 weeks, but the borrower doesn’t want to pay the lender’s due diligence fees and make a deposit into escrow to commit to the lender. His business plan shows he can pay off the loan in less than one year, but he ends up not proceeding. What would you do?
  • Case Study #2: Construction client building 55+ apartments wants low interest rate, low monthly payments and quick close! It turns out that HUD is a great fit for this type of project because they allow interest reserves during construction, amortize over 40 years and have low interest rates. But, they take at least 120 days to close. Borrower has owned the property for over 4 years but now he wants to close quickly. Hard money can close quickly but “costs too much.” What would you do?  (Borrower is still shopping for the perfect loan.)

These are two of the many examples where conflicting priorities either causes the lender to say no, or causes the borrower to fail to take action.

Tips to Get a Quick Response

Here are some tips that will help you get a quick response from a commercial mortgage broker or lender.

  1. Have all the relevant information summarized in a single document. There’s nothing lenders hate more than having to fish around for information and then not find everything they need to know.
  2. Make sure your needs and priorities are clearly defined.
  3. Have all your supporting documentation prepared and organized should the lender ask for more information.
  4. Be financially prepared to obtain a commercial loan, with out-of-pocket expenses, deposits, your equity contribution and cash reserves.
  5. Eliminate any potential delays on your part before they happen! In other words, be prepared to pull the trigger when the lender says yes!

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Sofia Capital Ventures makes it easy for you to make an initial loan inquiry. Just CLICK HERE.

By |March 9th, 2017|Commercial Lending|Comments Off on Loan Inquiries that Get Results
Barbara Leuin, Commercial Lending Expert
Barbara Leuin, Ph.D., Commercial Lending Expert, Carlsbad, CA, is a serial entrepreneur and real estate investor, with over 30 years of professional experience, including 13 years of university teaching in business and economics; 16 years of business consulting; and 5 years as a full-time real estate investor. Since 1996, she has helped start-up businesses access millions in private capital. As CEO, Barbara brings visionary leadership, team-building and leadership to Sofia Capital Ventures. She is responsible for lender relationships, broker training and identifying market opportunities.

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