As most commercial mortgage brokers know, there are a number of reasons your borrower could be turned down by the bank. Whether it’s past credit issues, unpaid taxes or an unusual property type, it’s your job to understand why your commercial mortgage borrower is non-bankable and to provide a solution. For some borrowers, a short-term hard money loan could be the answer. However, for those seeking something in between, alternative financing through a non-conforming lender could be the best fit. So, when is this type of loan best for your borrower?
Their past credit issues have been, or are in the process of being, resolved.
If the challenges your borrower is facing in terms of the credit history are severe and ongoing, hard money is likely the best option. However, if your borrower has rebuilt their credit and is looking to further improve their financial situation, a small-balance commercial mortgage from a non-conforming lender could be their best bet. These loans are easier to obtain than a mortgage from the bank and allow your borrowers to better their business without a balloon payment looming in the near future.
They want stability.
While a short-term hard money loan might be the right choice for some borrowers, small business owners seeking a long-term option should steer clear. These borrowers who need a stable financing source and a consistent monthly payment over a more substantial period of time will be best served by a non-conforming commercial mortgage lender. Seek out lenders with fixed rates and amortization over a longer period of time.
They want reasonable rates.
While non-bankable commercial borrowers certainly won’t qualify for bank rates, many can qualify for a lower rate than any hard money lender will offer. Non-conforming lenders occupy this middle ground, and you can generally expect rates ranging from about 7% to 11.5% for most borrowers.
As a commercial mortgage broker, you need to be able to find all kinds of borrowers financing in order to succeed. For those who don’t qualify for the bank, but don’t want or need a hardy money loan, a non-conforming commercial mortgage lenders is a great option. Cultivating relationships with these lenders and the borrowers they serve is a great way to bring in new business and increase your income.