Picking the Right Commercial Property Lender

What a Super Weekend for sports!  No … NOT the Super Bowl (although I’ll get to that), I mean the Australian Open.  When Federer plays Nadal in a Grand Slam final, you begin to lose words to describe what you see.  Even the announcers were speechless, and it’s their job to talk!  Hats off to Rafa for beating Federer in 5 amazing sets and dispelling any doubt as to who is truly #1 in tennis.  If you’re not a tennis fan, go see this match.  If it doesn’t make you one, you need life support.

And many thanks to the Cardinals and Steelers for putting on an amazing show of their own.  We have had two years in a row of “Good” Superbowls … the ones that live up to the hype and don’t have you dipping deeper into the chips before half time for something to do. Congratulations, Steelers for Championship #6.  And may Kurt Warner come back one more season for another run to the Superbowl.

Both of these events highlight the importance of having a coach get you to the top of your game.  That’s why I talk about great sporting events so much.  None of these players or teams would be where they are without the help of their coaches and mentors to help them fill the holes in their games and get more effort from them each and every week.

This week’s commercial loan origination tip concerns your lender choices.  When seeking commercial real estate financing for your clients, picking the right lender is half of the battle.  There are different types of commercial lenders, each with its own set of lending preferences:

• Depository Institutions which include Banks, S&L’s, Credit Unions, and Mutual Savings Banks.  They prefer shorter term financing such as construction and bridge loans with adjustable or short term fixed periods and are very borrower oriented in their underwriting.

• Life Insurance Companies and Pension Funds prefer longer term fixed rate loans, only lend on high quality properties, and usually offer only permanent financing.

• CMBS or Collateralized Mortgage Backed Securitizers (Wall Street) usually only get involved in fixed rate permanent financing (although sometimes will do “floaters” or adjustable).  They are “conduits” for mortgage originators, buying loans and putting them into securities.

• Private Investors and Funds also like short term construction and bridge financing, although they are property oriented (looking for lower LTVs) and will lend on higher risk projects.

• Mortgage Banks and Direct Lenders represent one or more of the above, fund or table fund the loan, do not keep it, but may service it.

• Mortgage Brokers represent one or more of the above, but originate only.

Researching the proper type of lender can save you hours of frustration and thousands of dollars in lost time and mis-applied fees.