Who is Your Commercial Loan Broker?

What can your commercial loan broker do for you? That all depends on which broker you choose to do business with. As is the case for most things in life, there is a variety of financial institutions to choose from. However, not all brokers will provide the same options, variations on loans, and services. Each commercial loan broker will offer similar products and services, but no two will offer the exact same set of products and services. Thus it is important to analyze the advantages and disadvantages of potential commercial loan brokers before choosing one.

Things to Consider

1. What will the broker finance? – Many brokers specialize in only financing certain types of opportunities and investments. For instance, you might be especially interested in making an investment in an income property, so you will require a commercial property loan. The commercial loan broker you are looking for should fit your needs and hopefully be willing to finance a variety of different income properties. Perhaps you wish to develop a diverse portfolio of income properties by investing in an array of apartments, hotels, office buildings, health care centers, and industrial spaces. To realize this strategy you will need to find a commercial loan broker willing to extend a commercial property loan each of these various income properties.

Some brokers may limit the scope of properties they are willing to finance as a way to limit their risk or exposure to that sector of the real estate market. Remember, financial institutions are in the business of making money just like you. If they feel the reward of the loan does not justify the risk, they will not be very interested in financing the venture. Odds are you can find financing elsewhere, but for simplicity and efficiency you will want to limit your relationship to one or two commercial loan brokers.

2. Are the Rates Competitive? - You can’t blindly do business with a commercial loan broker just because they offer a great commercial property loan along with all the other products and services you require. One of the driving factors of successful businesses is minimizing costs. A commercial loan is not free, and thus the cost of the loan should be analyzed. The cost of the loan obviously includes the interest rate you will have to pay on the balance of the loan. This is a real cost, and should be compared to the rates other competitors offer.

Once you have compared interest rates, don’t think you are done analyzing costs. Financial institutions always charge a variety of cleverly named and sometimes disguised fees on commercial loans. Find out what kind of fees your commercial loan broker is charging and compare those to their competitors. At the very least, you can keep your commercial loan broker honest by monitoring the fees charged.

3. Don’t Forget about the Intangibles. - Products, services, and rates are all things you should consider when selecting a commercial loan broker. But do not undervalue the type of relationship a broker is willing to commit to. Some commercial loan brokers are completely hands off, and will offer little or no assistance beyond booking your loans. Others provide more personal assistance to meet your needs, even serving as a sort of unofficial consultant to your business. Odds are you will want a commercial loan broker that is willing to develop a real relationship with you and your business. The experience and business knowledge they provide to your business is often worth more than a slightly better interest rate. Selecting a commercial loan broker that is committed to seeing you succeed will go a long way in helping you realize success.