Tag Archives: commercial loan training

Loans For Love

OK, that is admittedly an odd title for a commercial lending related post, but I had to tie this post to Valentine’s Day somehow, right? Yes, gentlemen… Valentine’s Day is quickly approaching and if you haven’t planned for it, you’ll be paying a premium for those roses, chocolates, and good luck getting a good seat at Mastro’s Steak House!

And that allows me to segué into my “lending” topic: Planning, specifically as it pertains submitting a commercial loan request. One of the most difficult aspects of being on the lending side is getting “piecemealed” on the information that we need to make a realistic decision on interest in the transaction and pricing. This represents a lack of “planning” from my perspective.

This is especially apparent in “fast funding” situations. There’s an old saying: “A lack of planning on your part does NOT constitute and emergency on my part.” Pulling documents one at a time out of a broker or borrower does not bode well for a quick close. So what does it mean to “plan” for a submission?

I would suggest at the very least that you have the following prepared and ready to sent to a lender:

  • A well prepared and complete Executive Summary describing the transaction clearly, no more than 2 pages of text, with pictures.
  • The guarantor(s) Personal Financial Statement, Schedule of Real Estate, and Credit Report.
  • If a purchase, the Purchase and Sale Agreement and Offering Memorandum.
  • If a refinance, SOME validation of value (either comps, a recent BPO, or an appraisal) and a breakdown of equity injected into the project.
  • A Use of Funds Statement.

All of that should pretty much describe the transaction in enough detail for a lender to provide a realist and quick response on pricing and closing time. Yes, it means more work on your part… at first. However, you’ll find that when shopping for good loan alternatives, this approach will save you a HUGE amount of time an headache.

Now gents… get out there and get those flowers, chocolates, dinner reservations, teddy bears, and anything else to let your special someone know just how special she is!

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender who has been in the commercial real estate lending business since 1993.

The “Three Lender Rule”

If you broker loans for a living, whether commercial or residential, you’re only as good as the lenders with to whom you submit those loans. If you’ve been in the business for any length of time, then you know that your enemy is “time.” Your lenders are constantly change their guidelines, loan appetites, credit boxes, submission procedures, etc. all the time. Staying on top of those changes so that you can be an effective resource to your clients, is almost a full time job in itself.

Let me introduce you to the “Three Lender Rule.” I discovered this in my brokering career by accident. Basically it says that if you submit your loan request to multiple lenders and THREE of them give you essentially the same answer (accept or pass), then that will represent roughly 98% of all lenders to whom you submit that transaction. So what’s the take away and how do we leverage this for success.

First, you can use this as an effective time/loan management tool. If you get three “no’s,” then it is probably a good idea to let another broker waste HIS time on that loan while you focus on another one. (I’m not saying that this rule is perfect, but if you’re managing a large pipeline, then it’s a VERY good rule of thumb). Or give it to an assistant to try to find that lender exception.

Second, you can use the rule to develop a very effective Lender List. Now you know that you can pick 3 bridge lenders, 3 multifamily lenders, 3 office building lenders, etc. until you have a full grouping for those types of properties in which you care to specialize or represent. This magic number is also much easier to stay on top of then say 20 bridge lenders, 15 self storage lenders, and the like. Yes, have some back-ups, but keep 3 “top tier” lenders for each category of property you like to finance.

Last, you will find that giving most of your attention to fewer lenders will result in getting better concessions and exceptions from those lender when you really need them. Loyalty can provide you with rewards when you need them.

Next week I’ll discuss how lenders are more important to you than borrowers with regard to growing and maintaining your loan brokerage business.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com. We also offer educational, interesting, FREE Reports for industry professionals and investors: Click Here to get yours. And Click Here to obtain free Broker-specific tools.

Executive Summaries: The Alpha & Omega

What do you really have to do to get a commercial loan approved and funded? Dragon Realty Capital is a direct lender. We take loan submissions from mortgage brokers, loan officers, and banking professionals. What we notice in this process is how FEW of these lending professionals seem to know what it takes to present a loan to a lender in a way that will actually get it funded!

Dragon will be sponsoring a series of commercial broker training and industry networking seminars in 2019. In support of that, we’re putting together a series of blog posts that previews some of the key elements of that training. We hope that you find the information useful in your practice or in understanding the commercial lending process.

The first installment involves the Executive Summary. Ironically, while it is the FIRST document (Alpha) that you send to a lender it is the LAST (Omega) document that you prepare before sending in a commercial loan request to a lender. From its name you should get that is “summarizes” the loan request. Before you can prepare an effective one, you need to do some work!

You’ll need to understand the history of the transaction (how did you get to the point of needing a loan?). What is the motivation for the request? What’s the timing or urgency to close? What kind of property is it? What is its Net Operating Income, who occupies it, where is it located, and what kind of shape is it in? What about the guarantors? Who are they, what kind of experience do they have, what’s their credit like, and how much money do they have in the bank? And there are even more things that go into a good Executive Summary.

We send our brokers a template for creating one on each submission that does a pretty good job of laying out the story. You can get one for free at any of our Loan Program pages under the Loan Programs tab here: www.DragonRealtyCapital.com. You can also get some good, FREE information on other aspects of commercial lending and marketing by Clicking Here.

In the next installment I’ll cover the first few questions that you should ask ANY borrower to see whether or not you’re wasting your time on a potential loan request.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com.