Small-Balance Commercial Borrowers

It’s a fact that every commercial client we meet will be unique.

1. Borrower wants to purchase the property their business is leasing
Small business owners may want to purchase their property so they can build equity in the building, earn additional revenue through monthly rents, and even enjoy tax benefits.

2. Borrower wants to invest and grow their portfolio
Investors like adding commercial real estate to their portfolios because their assets’ value can be appreciated in multiple ways. Not only can demand increase through market scarcity, but their property can also become more valuable based on the income it generates.

In other words, while those who invest in stocks and bonds are limited to buying and selling, commercial real estate investors can take steps to add value to their assets, either through re-tenanting the property or making physical improvements.

3. Borrowers who have been turned down by banks
A prospective borrower’s first stop will likely be their local bank, especially if they already have a depository relationship with the institution. Unfortunately, many of these borrowers are either turned down or offered a loan that meets a few of their original needs.

4. Borrowers with maturing loans
Unlike residential loans, the average commercial mortgage term is somewhere between 5-10 years. As a result, business owners and investors must refinance more often.

Since many commercial loans include balloon notes at the end of their term, it is common for borrowers to have a pressing need for our services

5. Borrowers wishing to refinance out of higher rate, shorter-term bridge financing
Commercial borrowers regularly secure short-term loans to “bridge” the gap while they prepare their property for sale or permanent financing. These loans typically carry a high-interest rate, so borrowers are eager to take them out with a longer-term solution as soon as they are able.

While these borrowers may not be ready for bank financing, they are often in a position to lock in lower monthly payments and more flexible terms.

6. Borrowers looking to cash out equity from their existing commercial properties for working capital or other business expenses
One of the most common borrower motivations in the small-balance commercial mortgage arena is the cash-out refinance. This occurs when a borrower wishes to tap into the equity they’ve built up in a property over time. By refinancing, they are able to use this cash to make business improvements or purchase another investment property.

Unfortunately, many traditional lenders either don’t offer cash-outs or significantly limit the amount of cash borrowers are able to access.

7. Borrower requires high LTV
Business owners and investors often turn to a broker when they need help securing a higher loan-to-value than they are able to get on their own. While we offer LTVs up to 80%, traditional banks typically set a maximum LTV of 75%. Hard money lenders may limit LTV to somewhere in the 60s.

8. Borrower does not have reportable income on tax returns
Borrowers who are investors or self-employed professionals often have difficulty producing tax returns that tell their whole financial story.

When these borrowers struggle to meet traditional documentation requirements, they turn to us for assistance.

9. The property is recently stabilized
Traditional lenders typically want to see that a commercial property has been stabilized for at least 2 years before they approve a borrower’s loan request. If a borrower has only recently re-tenanted their apartment building or office space, they come to us looking for a more flexible lender option.

10. No seasoning on title
Borrowers also have a common need for title seasoning flexibility.

Once you begin to communicate with commercial loan brokers, you’ll soon find these motivations are common. Knowing how to solve needs to help you quickly grow commercial property portfolio.  Our experts have closed thousands of small-balance commercial loans. When it comes to borrower motivation, they’ve seen it all.

Contact our office today to discuss any commercial scenarios you may have now.