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How to Handle a Commercial Borrower’s Bank Turndown

Commercial Mortgage
Posted on 
September 21, 2018

Being turned down for a commercial bank loan can feel like the end of the road for a borrower. As a broker, it’s your job to let them know that they have other options and to find a lender and a commercial mortgage that best fits their needs.

So, here’s how you should proceed when a client gets turned down by a bank:

Reassure your borrower.

If your commercial borrower is turned down by the bank, it’s important for you to explain that there is no need to panic and that there are other financing options out there for them. Keep your borrower focused on their business goals, and let them know that you will do your best to get them the small-balance commercial mortgage that they need.

Reach out to alternative commercial mortgage lenders.

Once your borrower has been turned down by the bank and you’ve discussed the reasons for the turndown, it’s time to reach out to alternative financing sources. If your borrower was turned down because of something like past credit issues, past due taxes or a loan amount the bank considered too small, you should contact small-balance commercial mortgage lenders who specialize in non-bankable clients. These lenders understand the challenges small business owners face, will listen to your borrower’s story, and will be more likely to be able to finance their commercial mortgage request.

Prepare your borrower for a non-bank commercial mortgage.

Before you submit a deal to a small-balance commercial mortgage lender, get a sense of their programs, as well as their average rates and terms. Once you have this information, you’ll need to relay it to your borrower. If they were expecting a bank loan, the higher rates alternative lenders charge might come as a surprise, so be prepared to explain all of this thoroughly.

While being turned down by the bank is a difficult situation for any commercial mortgage borrower, there are other options. Let your borrower know that it’s still possible to obtain the financing they need, and make sure that you choose the right alternative lender and let your borrower know what they can expect. It might take a little extra work, but you can still close these commercial mortgages.


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