Understand goals, gather the information needed, and boost your trusted advisor status.
When it comes to small-balance commercial loan opportunities, gathering the right information from borrowers up front helps to qualify the property and facilitates lending more quickly.
Brokers who use a consistent approach to qualifying small-commercial loan opportunities are often more organized, have a better understanding of the borrower’s overall objectives, and as a result are best prepared for placing the transaction with the right lender. Asking the right questions also helps to reinforce your position as a trusted advisor who understands the lending process and borrower needs.
We’ve found that a go-to list of questions and discussion points similar to the one provided below is valuable in guiding that first conversation between broker and borrower. You may wish to build on this or adjust as necessary to make it work for you.
Start with the basics
- What is the borrower’s motivation for financing?
- Is there an issue with the property or borrower that might limit the amount of lenders?
- What is the real estate type and current use of the property?
- How many units (multifamily) and/or what is the occupancy level and tenant mix?
- What is the NOI (Net Operating Income)?
- What is the square footage?
- Does the property require rehab or repositioning?
- Do you have photos of the property or have you inspected the property?
- Was the property used previously for a use that may raise a concern for environmental issues?
Objective of the project
- Is the property owner-occupied or an investment?
- What is the expected holding time for the investment?
- Will the ownership entity be individual or corporate?
- If this is a refinance, what is the loan purpose? (Cash-out, payoff, balloon pay-off, improvements, rehab, etc.)
Supporting information and documentation
- How was the value of the property determined? What information is available to support this value?
- What is the balance on the current mortgage and when is it due?
- Is the history of mortgage payments available?
- Can you provide the most current operating statements and rent roll?
- What is the borrower’s credit score? Is a credit report available?
If a purchase:
- Is the property listed by a real estate professional or is it a private sale?
- Is there a purchase contract in place? Request a copy including amendments.
- What is the closing date per the contract?
- Is there a financing contingency?
If a refinance:
- When was the property purchased? What was the purchase price?
- What improvements have been made to the property?
- What is the pay off amount including mortgages and other liens?
- Is there subordinated debt that will remain in place?
- Is the property currently listed for sale?