Commercial mortgage borrowers should be prepared to avoid certain problematic commercial lenders unless alternative business loan options are impossible. One of the most serious commercial loan situations is a commercial lender that causes problems for their commercial borrowers on a repeating basis.
As a direct result of my commercial loan experiences advising business owners for over 25 years and regular conversations with other business financing professionals, I do in fact believe that there are a number of commercial lenders that should be avoided. This conclusion is based on a recurring pattern of lending abuses by some business lenders.
This commercial loan strategy overview will discuss the value of avoiding "problem business lenders", but we will not attempt to name specific commercial lenders to avoid. Key examples will be provided to explain why commercial borrowers should be prepared to avoid a number of commercial lenders when looking for successful business loan programs.
Worthless Business Loan and Commercial Mortgage Pre-approvals
Business borrowers often want an early pre-approval for their business loan. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved.
An ethical business lender will view any business loan approval as a serious and binding action. Borrowers should not expect that a such an approval is routinely possible in a day or two.
However, there are lenders who prepare a misleading and questionable version of a pre-approval shortly after receiving minimal application data. Because this approach often produces surprises for the borrower as the commercial mortgage process moves forward, borrowers should be wary of any lenders that do this.
Why do some commercial lenders provide such meaningless pre-approvals for a commercial mortgage? There are two likely reasons. (1) To motivate the commercial borrower to stop considering other potential commercial lenders. (2) To provide a business loan pre-approval that is similar to a structure prevalent with residential loans.
Due to the fact that numerous business loan processes are coordinated by residential mortgage brokers who are unfamiliar with typical commercial mortgage situations, this factor will be particularly pertinent when working with lenders that focus on business financing originated by less-experienced residential mortgage brokers. Such a misleading business lender should not even be considered for most commercial loan scenarios.
Yes or No for a Commercial Mortgage Business Loan?
I published an earlier article which reported the questionable technique of many local and regional banks to say "yes" when they mean "no". When this happens, a bank will attach non-competitive commercial mortgage terms to business loans instead of refusing the loan. Business borrowers should explore other business financing options instead of accepting such unacceptable commercial loan terms.
Thinking Outside the Bank for Business Financing
It is not unusual for the leading business lender in some markets to use more restrictive commercial mortgage terms. Such lenders often take advantage of a lack of other local commercial lenders.
For many business lending scenarios, a non-local lender can probably provide better business loan terms because they are normally competing with other business lenders. It is not wise for borrowers to rely upon local banks for most business financing requirements.
Commercial Appraisal Process and Business Financing Problems
For commercial mortgage loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The commercial appraisal process is lengthy and expensive, so avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.
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