Guide to Commercial Mortgage Lenders

Recently, I have had the pleasure to become involved with a commercial transaction. My client was seeking knowledge on how he could secure the best deal on his commercial loan. During my research I happened upon a great article by Irwin Speizer from Work.com. It is informative and includes many links for additional research.

Tips and strategies to land the best deals on commercial real estate loans
If you want to buy or expand an office complex, warehouse or retail building, you need a commercial mortgage. Commercial loan rates can vary considerably based on the amount, duration and type of loan as well as on the lender. That's why it's so important to choose the right commercial mortgage lender. Doing so can help you:
1. Secure financing to buy or expand your business property.
2. Secure a long-term location without rental rate hikes.
3. Profit from the increase in value of your business property.
4. Secure a mortgage loan at a favorable rate and term.
5. Increase your tax deductions.
Action Steps.
The best contacts and resources to help you get it done
Prepare your financialsCommercial mortgage lenders want to see hard evidence that you can repay the loan, including financial statements, balance statements, profit-and-loss statements, projected cash flow statements and more. Lenders may want to see a business plan as well as background information on you and your partners.
I recommend:
Keep this commercial loan readiness checklist handy so you know which financial statements to prepare. Download a sample balance sheet and a profit-and-loss statement from UrgentBusinessForms.com, which also sells templates in Excel, PDF and Word formats. A downloadable template for cash flow projections is available from 1000Ventures.com.
Know your ratios. Most commercial mortgage lenders require certain percentages for three important ratios: debt service coverage ratio (DSCR), loan to value ratio (LTV) and debt ratio. DSCR is the net operating income divided by the mortgage payments. LTV is the total loan amount divided by the fair market value of the property. Debt ratio is determined by dividing your monthly debt obligations by your monthly income.
I recommend:
Keep abreast of commercial loan rates and use the debt service calculator courtesy of CommercialBanc.com to estimate your DSCR. Shop for mortgage lendersThe commercial mortgage and commercial lending market is crowded with bankers and commercial mortgage brokers eager to place your loan. Choosing one requires careful consideration of rates, terms, duration, down payment and other conditions. Often the bank that handles your business checking accounts may be willing to offer you a commercial mortgage loan at an attractive rate or with favorable terms in order to get more of your business.
I recommend:
Among the big banks that offer commercial mortgage loans to small businesses are Wells Fargo, Citibank and Wachovia, which allows you to apply online. Among the numerous online services that help you shop for commercial mortgage loans are iBank and Businessfinance.com. Fill out a short online form at BuyerZone.com to receive quotes from several commercial mortgage lenders. Negotiate a deal and close the loan-Choose two or three lenders that seem to offer the best deals and most closely match what you need. Negotiate with each one, letting them know that you're shopping several other sources. Having options gives you at least some leverage in the negotiation process. Once you have decided on your top pick, proceed to finalizing your commercial mortgage loan. It's wise to use an attorney to review the loan documents and make sure your interests are served and protected. Your attorney can also help walk you through the closing.
I recommend:
The Capital Consortium offers a number of sample mortgage loan documents online for review. Find an attorney who specializes in real estate at AttorneyPages.com.
Tips & Tactics Helpful advice for making the most of this Guide
Learn from rejection:
If you get rejected for a commercial mortgage loan, find out why and try to remedy the shortcoming. Then apply again, perhaps with a different lender.
Watch for balloons:
Commercial mortgage loans are often for periods of 10 years or less, with the entire remaining amount due at the end of the term as a balloon payment. Be prepared to refinance or pay off the balance.
Down payments required:
Most lenders require at least a 20 percent down payment on a commercial loan.
Look for hidden costs:
Extra loan fees and costs can add up. Lower-interest loans can sometimes cost more because of extra fees and charges.
Keep your credit clean:
If you have other business credit lines, keep them up to date and out of trouble. Any bad credit marks can make mortgage lenders leery.
Pay attention to restrictions:
Mortgage lenders will sometimes impose restrictions on the use of your property as a condition of the loan. Be sure to ask about any restrictions and make sure that you agree with them.
Recommended Solution Providers:
Key Small Business: Loans and Lines of Credit
Offers small businesses term loans and lines of credit.
Wachovia Small Business: Lending
Small business credit options including commercial mortgage, business and construction loans.
Citibank Commercial Real Estate Group
Includes lending options for retail, office and industrial uses.
US Bank: Small Business Services
Includes commercial lending and commercial construction lending services.
Business Finance: Commercial Mortgages
Search commercial mortgage sources by capital type or funding category.
LendingTree.com
Search lenders for commercial purchase, refinance, construction and short term bridge loans.
Best Sites to Learn More
BNET Commercial Lending
Industry white papers on aspects of commercial lending including mortgages.
NFIB: Leasing
Articles covering leasing versus owning commercial properties.
Entrepreneur.com: Expansion Financing
Articles on how to obtain financing for your company including commercial mortgages.
AppraisalToday.com
Commercial mortgage backed securities overview article.

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