Commercial loan brokers must provide real service to their clients. The emphasis should be on saving your customers time, helping them avoid hassles, costly mistakes, and of course, being able to align the right bank with the borrowers unique situation. Simply put, the broker’s prior experience should help guide the borrower, who may have little or no experience obtaining, negotiating, processing, and closing a commercial mortgage.
One of the most valuable components of what a good commercial loan broker does is introduce borrowers to lenders they could never (realistically) find on their own. There is an entire market of business lenders that do not have branches and instead rely on their broker networks to find deals and introduce creative/unique programs that traditional banks don’t offer (such as stated income business loans, 30-year business loans fixed or second link position loans, etc.).
Additionally, brokers must be able to give their clients strong and meaningful recommendations about which specific lenders are a good fit for the borrower’s situation. The actual differences from one lender to another can be very difficult to discover. There are obvious factors such as which banks quote the lowest rates, offer the longest repayment schedules, longest fixed terms, etc. But issues that could potentially kill you or change loan terms in the middle of loan processing are only discovered through experience. This is where a commercial loan broker really earns his fee and this intricate knowledge of the lender is only learned by being involved on a day-to-day basis. A good commercial loan broker closes 2-4 loans per month, while a borrower will only close 2-4 in his lifetime.
Brokers are basically on the same side of the table as your customers. Although there is no official representation agreement like a listing agreement, a broker must be there keeping in mind the interests of the borrowers of him. Also, unlike bank loan officers, brokers only get paid when the loan closes. They pay us to close loans. Many bank officers, by contrast, receive salaries and have other quotas in addition to financing loans, such as weekly meeting targets, number of phone calls made, applications turned in, etc. Thus, the bank officer may know that his loan has little or no chance of closing, but will “guide” you simply to protect his job (this happens all the time!).
A good broker will create a competitive environment with funding sources to produce the best rates and lowest possible rates for their clients. The broker’s reputation with banks will also add to this, since if the broker is known, the funding source will take the loan application more seriously, spend more time and energy filing. Lenders will also not “re-negotiate” as quickly with good brokers for fear that the broker will not bring additional loans to the bank.
Brokers worth their “salt” should be able to identify the right options for the borrower based on the little complexities of the file. Often, it’s a small detail that will slow down or kill a deal. A solid broker should be able to identify these details early on that would otherwise cost the borrower thousands and waste months while the wrong lender tries to get the file into their guidelines.