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Refinancing Your Commercial Borrower’s Merchant Cash Advance

Commercial Mortgage
Posted on 
October 27, 2016

While merchant cash advances might be workable, short-term solutions for some small business owners, many become overwhelmed by the ever-increasing interest rates they’re subjected to. This can lead to a cycle of payday loans, resulting in serious debt. If you’re a commercial mortgage broker who works with small business owners, it’s important to be aware of these potential borrowers who can benefit from your services.

Here’s what you need to do:

Let borrowers know you can provide a solution.

Many small business owners are unaware that there are lenders who can help them to refinance their property in order to pay off merchant cash advances and make their debt more manageable. As a commercial mortgage broker, this is where you come in. Advertise the fact that you have relationships with small-balance commercial mortgage lenders that can provide borrowers with the financing they need.

Assess the borrower’s debt.

Before you reach out to the lenders with whom you do business, talk to your borrower about their situation. Develop an understanding of what led to them taking out payday loans and how much money they need to repay the debt and secure more stable financial footing.

Submit a completed commercial mortgage application.

Once you’ve discussed your borrower’s situation and needs, it’s time to send your lender the mortgage scenario. Make sure that you include a completed 1003, a tri-merge credit report with scores and tradelines, photos of the property and a letter of explanation detailing why your borrower needs the money. Be prepared to discuss all aspects of the loan scenario in detail with the lender.

According to a report by the Federal Reserve, 7% of small-business owners in a 26-state region applied for a merchant cash advance, and in some states, that figure is as high as 18%. For brokers, this represents not only an opportunity to help potential borrowers secure a stable mortgage, but also a chance to close more loans and earn additional income.


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