| Entrepreneurs that have been through the | | | | most entrepreneurs realize. For example, there's a |
| process of purchasing a commercial property for | | | | little known 30 year fixed commercial loan that |
| their business, understand the complexity of the | | | | has rates and fees right in line with bank financing, |
| process. Securing financing is just one part of the | | | | but the loan is fixed for 30 years. The borrower |
| equation - which in and of itself is cumbersome | | | | can enjoy piece of mind knowing they never |
| and borrowers literally have 100's of loan option to | | | | have to worry about refinancing or having their |
| choose from. | | | | rate adjust in the future. |
| A very common mistake we see is that | | | | In addition, because of the long amortization |
| entrepreneurs assume they will get the best deal | | | | period the cash flow savings can be substantial - |
| from their existing bank. It's a logical assumption. | | | | often 15% - 25% less than a typically 5 year |
| After all, the business has their checking/savings | | | | fixed 20 year amortization bank loan. |
| account, perhaps they have other services such | | | | Business owners may consider working with an |
| as their 401 k etc tied in with their bank. And | | | | experienced broker that is in touch with |
| they have personal relationships with the people | | | | innovative commercial mortgage programs that |
| and assume this will help them get a break/edge. | | | | are not offered by banks. A broker normally |
| The reality is that traditional banks have the most | | | | works with several different lenders, each of |
| conservative underwriting standards and offer | | | | which has multiple programs. So, by working with |
| some of the shortest fixed periods and | | | | a broker the borrower is exposed to many |
| amortization schedules in the market. | | | | different options, and only has to deal with one |
| To often the business owner simply does not | | | | source. Essentially the broker's market knowledge |
| shop and get lured into a short term loan that | | | | can quickly and efficiently point out all relevant |
| either adjusts, from once a quarter to once | | | | options that fit the business owner's situation. |
| every 5 years or full on balloons. This puts the | | | | A common misperception is that brokers will add |
| business owner in a very vulnerable position as | | | | a substantial cost onto the loan, which is simply |
| rates/terms could be much worse when the loan | | | | not the case. A good broker will create a |
| adjusts or balloons. | | | | competitive situation between banks/lenders and |
| Another issue of having your commercial | | | | should save the borrower money, not just tack |
| mortgage held by your bank that has your | | | | on an additional origination fee. Likewise, most |
| deposits is a nasty little provision called the "right | | | | brokers now get paid directly from the lender on |
| to offset". This means that the bank has the right | | | | deals from $200,000 - $5,000,000, so the |
| to enter your checking/savings account (business | | | | entrepreneur doesn't have to worry about that. |
| or personal) and remove cash to "offset" the | | | | Regardless, if the borrower wants to shop on |
| balance that's owed on the mortgage. Banks only | | | | their own or work with a broker it is in the best |
| exercise this right in times of distress/default but | | | | interests of the entrepreneur to get out there |
| it is dangerous for the borrower and often comes | | | | and explore options. Don't simply assume that |
| when the business owner has the biggest need | | | | your existing bank has your best interest at |
| for cash - in bad times. | | | | heart, because they don't. |
| There are many more options out there than | | | | |