I often hear a broker complain that they have had a deal on their desk for months, and need to close them. Many reasons this happens is the Broker is not educated on commercial in where to go, how to structure, and even what info to ask for from the borrower. These Brokers work in bits and pieces and waste their time, and the clients time if this deal is not even a closeable deal. If you can look at this deal and get the borrower back answers fast it reduces the pressure on you as the broker. If the deal is not doable, you have saved yourself time. You even created value in your services if you educate the borrower on why the deal will not work, and then offer structure changes that will make the deal close.
Another key that I will touch on in another message is speed. Not just for the above reasons but because you are being shopped. If this deal is a good deal you want to bang out a term sheet as fast as possible to keep this deal in your hands. If you are asked about rate without docs a Broker or Lender will not be able to give a real rate. Usually just a range and say “it depends”. Get loan summary filled out and ask questions so that you look like the consultant and create value.
There are many docs needed to review in a deal. A borrower and seller are always slow at getting what is needed. The key to getting these docs is confidence and firmness. You need to start the urgency with the borrower to get docs to you in a reasonable amount of time. More than likely there is a contract already in place which means that you are in a time crunch from Day 1. These borrowers have contracts that they will lose their hefty deposit on a deal if the financing is not in place. Without the needed docs to review the files strengths and weaknesses you can’t help yourself or the borrower. Explain the importance and demand the docs fast. You know how borrowers are at getting items needed, at being lazy, and slow. As you create value in yourself they will trust you, and know you are asking for this because it is needed. They should want you to evaluate their deal as a consultant on their side. Reviewing key evidence that points towards the Return on investment opportunity or whatever the borrowers goal may be.
You need to acquire these docs and crunch numbers to see if it’s a doable deal. The Key is to be firm and confident that “This is what I NEED.” Set a date they need to have these docs to you. If they need to call CPA ask if you can call the CPA. If they complain about forms, ask “Well you want 7 Million dollars don’t you?” You must be quick, because there is a hiccup somewhere and/or they do not like their rate and terms and you have to negotiate. Get the needed docs together, send in a complete package for this deal type to the bank. Get the letter of interest from bank put together a term sheet from letter of interest ( LOI ) and have your client sign it.
Its best to use a PQ form based on each deal type to help explain the deal to you and your UW. When rate comes in to play DON’T sell rate. Sell payments, solutions, features of the loan and amortizations. Explain the payment to the borrower. A 30yr Am will have a lower the payment than what they may of been quoted by someone else. Go over Return on investment this is the best way to show your deal is better. Look at the deal as a whole. Your deal vs the competition and dissect each part from out of pocket due diligence, down payment, monthly payment, PPP, fixed term, and ROI with monthly and yearly. If you have done the best possible and are educated on where to go and structure you should already have the upper hand. Give the borrower 1 weeks time to accept the term sheet. If they do not come back in a week they are going to go to slow and shop more and more, and they are not interested. Move on. Note 9 out of 10 Commercial deals will not work, with you or anyone.
Step 1 in getting deals is marketing. Begin to let past clients, current borrowers in pipeline, and friends know you are doing Commercial loans. Let all your marketing materials and answering machine messages show you are doing commercial. Your secretary can mention not to forget to run any Commercial scenario’s by you.
Step 2 is PQ and ScreenFigure DSCR and look for any weaknesses in the deal.Tweak these issues or structure the deal to take to a Lender that allows these type of problems.*Think in time frames. Create urgency, with Lender and borrower. This will help get docs needed fast and info needed from Lender fast because they were already under contract. Remember you must think in speed, and urgency.You must also go fast because the borrower will have less time to shop, and a *contract is in place if a it’s Purchase. Have a NCND form signed to protect you from the borrower going around you.
Step 3 get a Term sheet kicked out to the client:Lock in your borrower with an agreement for financial services or term sheet. A Term sheet is better. A Term sheet should have 7 day expiration. This agreement says we are done shopping and you have a 90 days exclusivity. When you issue the term sheet them through the terms. Put the payment on the loan and walk them through the strengths and benefits. Call every 2 days till day before term sheet is expired being signed.