Become a commercial loan broker and offer loans to businesses in need of financing. Commercials loans are available for multifamily and mixed-use properties, offices, retail buildings, warehouses, mobile home parks, self-storage properties, hospitality properties, day care centers, restaurants, golf courses and several others. Offer non-real estate loans to qualified businesses that have good-quality receivables or sufficient assets, allowing businesses to buy equipment and inventory and cover other business expenses. Commercial loan brokers are also known as commercial loan consultants, who offer both commercial real estate loans and non-real estate business loans.
Check state licensing requirements prior to originating and brokering commercial real estate loans. Most states do not require commercial brokers to be licensed for either real estate or non-real estate loans. For commercial real estate broker requirements, go to integritymortgagelicensing.com; on the left side click on “Mortgage Licensing Requirements by Type,” then scroll down and click “Commercial Loan Licensing States” and view the appropriate state. If your state requires commercial brokers to be licensed, go to thomas-law.com/mtgbrokers.html to apply for your license.
Find lenders of commercial loans: On scotsmanguide.com, view the commercial loan section and search by typing in a sample loan scenario or simply scroll through various lenders. On weirdloans.com, register as a broker, type in a sample loan scenario and view potential lenders. On businesslenders.com, click on “Referral Partners” to prequalify your clients for a business loan or an SBA loan.
Prepare a fee agreement in order to properly broker commercial loans. Have an “Agreement for Financial Services” in place with your client. Address your exclusive right to represent, the borrower’s duties and responsibilities, the consultant’s (broker) duties, any disclosures, upfront application fee, consultant fee, noncircumvention agreement, and arbitration of disputes. State in your agreement that the upfront application fee does not include third-party fees such as an appraisal or inspections.
Know how to price your services. Charge an application fee of $2,000 to $2,500 at the time of application. Charge a consultant fee of .5 percent to 2.5 percent of the loan amount, which is due at closing. Generally the higher the loan amount, the lower percentage you charge for a consultant fee. Add an additional 1 percent if you use a private money lender.
Getting Ready for Clients
Know what documents to collect from the borrower. Interview the borrower using a standard residential loan application. Run a credit report and collect two years of tax returns, three years of operating statements, personal financial statements and rent rolls, if applicable. Obtain the borrower’s list of assets and accounts receivable when applying for a non-real estate loan. Generally, you can obtain a loan application form and other templates on lenders’ websites.
Understand the process. Prequalify the deal using the lender’s loan request form or prequalification sheet; fax this along with the loan application and credit report to the lender. Lenders evaluate the collateral, assets or receivables; it is the most important factor in a commercial or business loan. After a preapproval is issued and you have collected documents from the borrower, prepare a file and send it to the lender. For real estate-related loans, the lender orders the appraisal and any inspections. Closing a small commercial loan takes about two months; larger commercial loans can take anywhere between four and six months.
Start marketing and advertising. Hire a few loan officers to originate the loans or choose to do it yourself. Place a classified ad offering commercial loans, visit local Realtors and send a letter or email to your friends and family. Ask for referrals from anyone you come in contact with. Hire a telemarketer to call on local businesses and offer financing for equipment or inventory.
Contact your local city and county agencies along with the secretary of state to obtain any additional licensing or registration that may be required