Commercial loan brokers help businesses locate, secure and close on loans for commercial purposes. Those purposes may be related to real estate, for example, mortgages or non-real estate business plans or goals. The broker's purpose is to assist the business in locating potential lenders, helping them apply for financing from those lenders and structuring the best deals. Becoming a commercial loan broker may mean securing full-time employment through an established brokerage or launching your own small business working directly for clients.
What Do Commercial Loan Brokers Do?
Commercial finance is the process of arranging loans to business entities. Because of the variety of financing options and the potential complexity of the resulting deals, many businesses seek outside assistance in their financing plans. That outside assistance is often provided by commercial loan brokers, who help businesses both source and structure adequate financing.
Commercial loan brokers generally collect and analyze specific information about your company, then help the borrower sort out potential lenders who are willing to make commercial loans to small businesses. If the broker finds a loan with acceptable terms and structure and the company elects to take that loan, the broker’s fee is usually included in closing costs of the loan. Brokers may choose to waive fees if the company’s application for the business loan is turned down, while others charge regardless of whether the loan application is successful.
Commercial loan brokers handle financing deals for all types of potential business deals, including both real estate and non-real estate transactions. Commercial mortgage brokers specialize in helping clients secure funding for commercial real estate. That can include many types of buildings including multi-family dwellings that will be leased, retail space or any other type of commercial real estate.
Requirements for Being a Commercial Loan Broker
A loan broker license is not required in the majority of states for commercial brokers who deal in either real estate or non-real estate loans. However, in a handful of states, including Arizona, California, Florida, Minnesota, Nevada, New Jersey and North Dakota, some sort of licensing may be required to handle commercial loan transactions.
It’s always a good idea to verify licensing requirements with your state, as requirements may vary from state-to-state. Check state licensing requirements before originating and brokering commercial real estate loans. Be aware, however, that many states require mortgage brokers to be licensed, but then define “mortgage” in a limited way to apply solely to non-commercial real estate.
Average Salary for Commercial Loan Brokers
The salary that a commercial loan broker earns depends on many factors, including the level of experience, geographical area and market conditions. However, on a national basis, brokers earn an average of approximately $134,000. At the highest levels, top brokers may earn over $150,000 annually. Commercial mortgage brokers may earn slightly less, with a national average of about $87,000 annually.
How to Become a Commercial Loan Broker
Commercial broker training is available from some private businesses, both in online and in-person course formats. These programs can last five days or more in an intensive format, or longer for less frequent class scheduling. Fees for these private courses can run into the thousands of dollars.
Given the substantial investment, it’s important to do your research before committing to any specific provider or course. Review the course syllabus, if any, and find out what career preparation or business management skills, tools and connections the provider is prepared to offer students.
Training should focus on networking, mathematical and analytical skills. Also, courses should meet any licensing requirements established by your state. Courses that offer certification upon examination may increase opportunities for employment as well as make you more attractive to clients if you choose to go into business for yourself.
Launching Your Own Commercial Loan Broker Business
To start your own business as a commercial loan broker, you’ll need to prepare your workflow to obtain the required documentation for your efforts on your client’s behalf. The business client (the borrower) will provide this information to you, but you’ll need to know which information to collect.
Many commercial brokers initiate a client intake using a standard residential loan application. You’ll also need to run a credit report for the business entity (and probably for individual owners or shareholders for many types of business entities). Also, it’s prudent to obtain two years of tax returns, as well as two-to-three years of operating statements, personal financial statements and rent rolls, if applicable.
Also, request a list of assets and accounts receivable from each business client who is seeking a non-real-estate business loan. Loan application forms and other templates can be purchased through business and office supply stores, and may also be on lenders’ websites.
Specific lenders will use their own loan request form or pre-qualification sheets. Once these forms are filled out, send them via fax or email, as the lender prefers, along with the application itself and a copy of the company’s credit report. The lender will then evaluate the potential collateral and assets, as well as accounts receivable. Commercial lenders base the majority of their business loan decisions on these factors. For real-estate-related loans, the lender will also order an appraisal of the property as well as any required inspections. Closing a small business loan generally takes approximately two months; larger loans may take longer, up to six months.
As with any new business, you’ll need to market and advertise your services. Classified ads, networking with local real estate agents and direct mail campaigns to small businesses in your area are all relatively low-cost, effective ways to market a commercial loan broker business.