Nancy Rosedale, Vice-President

I get this question every few days. Are banks still lending in the small balance commercial world? It is indeed a very good question. Most of my lenders with whom I've established relationships over the past ten years have gone sideways. Gone are the Equity Ones, the Silver Lakes, and the Bay View Financials of the world. Lenders who were known for their exotic mortgages and quick, streamlined, gimmicky loan process are out of business and for good reason! Yes, banks are still lending money on properties that cash flow and to borrowers who can substantiate how they generate their personal income and can evidence reserves and their ability to save. Instead of the national companies offering 3% down on an owner-occupied investment property (yes, this really was available a few years ago), lending guidelines have returned to the days of old. My new lenders are credit unions and local S & L's. They will come out to the property to shake the hands of the potential borrowers to gauge character and to piece things together. Lenders want to walk the property and get a general sense of the neighborhood. Relying solely upon credit scores and an appraisal is a thing of the past. If you, as a realtor, wouldn't lend your OWN money to the borrower, it's probably not a good deal and the lender will quickly get a sense of that in person.

What can you do as a realtor to help your commercial loan officer present a streamlined package to the lender? Presentation is everything! A clean, professional looking rent roll including the names of tenants, length of residence, type of contract with seller (lease, month-to-month, or tenant-at-will), and amount of rent is essential. Make sure the entire form is completed and certified by the seller. In some cases, the lender may even require copies of all leases or tenant-at-will agreements. Prepare your seller upfront so there aren't any surprises or delays down the road. An income-expense statement should be prepared in the same way. All numbers disclosed should be accurate for the lender to see a true picture of how the property performs. If you want to take a step further, providing pictures of the property to your lender are very helpful. Several pictures of the structure and the immediate neighborhood can go a long way.

For start-ups, the lender will want to document the borrower's experience in the industry. Resumes are helpful. Strong business plans are critical. With the economy such that it is, lenders are very conservative and reluctant to assume this type of risk. However, I have seen first-hand that if a deal makes sense and is packaged and presented to a lender properly, it will happen. Don't take short-cuts. Seek out professional help if you are not skilled in putting together a solid, impactful business plan. There are plenty of agencies out there who offer this type of assistance. Put yourself in the shoes of the lender who is analyzing your risk. Try to think from their perspective and not your own. Back up your arguments with solid data and facts.

Lastly, prepare all borrowers to be willing and able to provide their most recent three (3) years corporate and personal tax returns (all schedules). They must also source their down payments and reserves (no gifts). Also be prepared to document and explain any derogatory credit. Lenders are less tolerant than ever before, yet will apply a common sense approach when extenuating circumstances are present and can be validated.

Remember, there IS money out there for the projects that make sense. Mortgage rates for most property types continue to be stable in the neighborhood of 6-7%. Borrowers are looking at down payments of 25% and more, depending upon an array of different factors. There is a plethora of opportunity out there and lots of inventory to choose from in most areas.