When is a Commercial Lender not a Commercial Lender?
A Commercial Lender is Not a Commercial Lender When it is a Bank
A commercial lender offers loans backed by hard collateral, usually real estate. Usually a commercial lender's lending criteria will be less stringent than at the local bank. This is because most banks focus on providing private residential financing for individuals of the local community, not large amount loans for real estate or commercial property acquisition. Most commercial lenders are not so much concerned with the borrower's financial record and qualifications as they are about the mortgage property value.
Unlike most banks, commercial lenders are able to provide a loan in a short amount of time-usually within several weeks depending on the mortgage terms. Commercial lenders also offer a wide variety of loan products. Perhaps the most popular of these products is the bridge loan. Bridge loans are most often used to take advantage of time sensitive real estate opportunities or to avoid foreclosure.
A Commercial Lender is Not a Commercial Lender When it is a Commercial Broker
Sometimes a commercial broker will pose as a commercial lender. The difference between the two is that a commercial lender actually provides money, while a commercial broker provides a convenient way for borrowers to find lenders. In most cases where a broker is used, there is no direct contact between the borrower and commercial lender. Indeed, from the broker's perspective, this would be a bad thing since they profit considerably from middleman fees charged to the borrower. So why are commercial brokers in business? By and large they are much more effective at advertising to potential borrowers than commercial lenders. Commercial brokers also provide the infrastructure necessary to carry out loan transactions. However, with more and more business being done over the internet, their chief value-add is their knowledge of, and access to, a long list of commercial lenders.
With more commercial lenders marketing themselves all the time, the value of brokers may diminish significantly in the near future. There are several significant advantages to having direct access to a commercial lender: 1) No broker fees, 2) Timely answers. Direct communication equals direct answers to your questions. A commercial lender either can, or cannot provide you with a loan-there's no incentive for them to waste time trying to figure out if you qualify or not. A broker, on the other hand, will often times spend considerable time finding what deal is best for them by going from direct lender to direct lender. If a commercial lender can't help you, they will be able to tell you what other lender can. 3) Timely closings. By working directly with your lender, issues can be resolved, questions answered, and loans closed. Loans options not offered through a broker may be available by going directly to a commercial lender.
What's the Trade-Off of Using a Commercial Lender?
Because of the quick turn around and conveyance provided by bridge loans and other high-risk commercial lender loan products, rates can be higher than at a bank. If you have the time and the financial qualifications, you might be best served at your local bank. However, commercial lenders are a great option for people with 'near-bank' loans, in other words, loans that were almost approved by the bank. With so many potential lenders available, it may seem a little daunting to find an option that works for you. Many times the only significant factor that sets two commercial lenders apart is the quality of their customer service. Traditionally, the commercial loan market is notorious for being short on professionalism. Find a lender who is willing to take the time you need to understand the details of your loan.