Commercial Mortgages for Small Businesses are notably different than Residential Mortgages. Commercial Mortgages are based on three main criteria but there are many variables that can make those criteria flex based on the lender and their goals. Yes... the Lender's goals.
In Residential Finance, my goal is to take the borrower's unique needs and match one of the thousands of Loan Programs from the hundreds of lenders to those unique needs.
Commercial Mortgages are a little more complicated for the Lender and the Mortgage Broker. Each lender prefers a different type of borrower, property and situation. This means that much of their decision making is subjective.
Yes... sometimes decisions are made by whether the bank brass like the property, the borrower or even the story behind it.
Lenders have all sorts of criteria by which they qualify businesses and individuals for a commercial loan... but a borrower can be denied for a loan simply because someone on the loan committee does not like something about the whole deal.
Needless to say, I make it my business to know where a potential borrower might fit. What lenders work what niches; what lenders are just not good with certain property types and where is the borrower going to be happiest with the relationship that is created.
My Commercial Mortgage motto is:
"I like helping Small Businesses become Big Businesses".
Working with a Commercial Mortgage Brokers opens up the opportunity for a small business to keep working on improving those revenues while there is someone working on their team to help them find the best lending relationship for them.
If you are considering a purchase of Commercial Real Estate, call a Mortgage Broker that is comfortable and confident in commercial finance to help your business grow to the next level.
For more information on this topic, read Florida Commercial Mortgage | Loans for Small Business ~ Underwriting Methodology
David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment, and Relocation Mortgages in Florida
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David, I do not do Commercial Loans, so I know very little about the process, so thanks for the insight on how they work.
David.... I know the basics behind commercial loans and have a good understanding on how they operate and what to look for. Other than that, I really don't go after them because of what you wrote about. They are much different than residential. One part that many don't know is that you typically need to qualify the property and it's income. But the borrower's credit and assets. But again, each investor buying these are different and you need to know this. Unlike the residential investors that all basically follow the same guidelines. Good post in educating those.
David,
I think like the others, I have done Commercial deals, but not really my thing, I do appreciate your explaining it the way you did...
Tom Weiss
David - another great post - it is important to work with a specialist and an mortgage expert like yourself. Especially in today's dynamic mortgage market. I hope the local Commercial Companies call you - you are a great resource - I always appreciate the advice you give me.
David, Great information. You really gave some useful information.
"If you are considering a purchase of Commercial Real Estate, call a Mortgage Broker that is comfortable and confident in commercial finance to help your business grow to the next level."
Do I really need to ad to that statement?
Great post David,
I have some clients who are looking at commercial property and I've had to really educate them on the differences. A lot of people seem to think it is just like buying a house. I've even talked to other Loan Officers that really didn't know very much about them. They are vastly different. I have some lenders who won't even lend on the project if it doesn't cash flow. There doesn't seem to be as much commercial projects going on around my area but I do take pride in learning all I can about mortgages whether they are residential, commercial, construction...etc.
again, great post David!
George, Jeff, Tom, Matt, Cyndee and Rick,
Thanks for all your support
As you all know, I grew up around development and builders and my first step into the industry on my own was as a commercial realtor... I learned a thing or two that I definitely bring to my career now
it is such a different methodology... but it is fun to be able to work for a different type of client every now and then!
Commercial loans are like you state a monster unto themselves. Making the loan to the lender is an important skill. Writing a loan proposal that uniquely captures a lenders attention and presents relevant details to lead to a credit decision is also important.
Hi David, Yes I'd agree that there are a lot of exceptions that go into commercial mortgages and its key to know what indivudual banks are really funding - especially in this market. That type of info is only availble through experiance or good relationships with the bank reps.
and its refreshing to hear somebody NOT say how easy it is to close a commercial loan. Because guess what, they can be hard. I like to use the word "brain damage"
Not to be to "salesie" (if thats a word) but we recently put together a commercial mortgage broker training book on how to screen deals/ calculate the NOI out of tax returns.