Industrial properties can be a challenge for borrowers seeking commercial financing. Banks and other traditional lenders are less likely to be interested in lending on smaller industrial buildings, so it’s important for borrowers to have an alternative. Brokers who specialize in the small-balance niche should be prepared to assist borrowers with industrial buildings in finding the funds they need.

Once you’ve found a lender interested in financing industrial properties and have completed a 1003 or commercial mortgage application, here are some questions you need to be able to answer:

How is your borrower’s credit?

Your borrower’s credit report and scores will be important to any lender evaluating their mortgage request. When you send the deal, include a tri-merge report complete with scores and tradelines, and make sure that you and your borrower are able to discuss any past financial challenges that your borrower faced.

What about the collateral?

During your initial conversation with the borrower, ask them about the property they’re planning to pledge as collateral. You need to know the size and location of the building, what sort of business is operating out of the property, and the approximate value of the collateral along with documents that back that value claim.

Are there any environmental issues?

More often than not, the biggest challenge facing borrowers in need of financing for an industrial property is environmental concerns. Ask the borrower if the property currently has any issues or has had problems in the past. Send the lender documents about how waste is currently managed and how past environmental concerns have been resolved. It’s best to avoid industrial properties that produce hazardous wastes, as most lenders won’t be interested in financing them.

How is your borrower planning to use the money?

Your lender will need to know what your borrower plans to use the funds for, so be sure to include that in your loan summary. Whether the borrower is looking to improve an existing industrial property, pay down debt or purchase an additional property, the lender will require this information to proceed.

Can your borrower make monthly payments?

As with any loan, the small-balance commercial mortgage lender will need to make sure your borrower has the capacity to repay the loan. Provide the lender with all relevant financial documents to show that the property cash flow meets their requirements and that your borrower is able to make their monthly payment.

While industrial properties can present a challenge for borrowers and brokers, many are worth the extra effort it takes to close. Providing the information above to your lender as soon as possible will make the process of underwriting and funding your borrower’s request much simpler, leaving you with a satisfied customer and a nice commission.

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