In a contracting real estate market, it might be very difficult for potential borrowers to find banks that are willing to fund their endeavors. But potential borrowers can still find a commercial lender in an economically challenging time.
Traditional lenders are nervous about the current trends in the real estate markets. After the economic collapse 10 years ago, the market was relatively quick to rebound, at least in the area of commercial real estate. This expansion has also had the consequence of scaring banks and other lenders. They are worried about a lack of return of investment that tumbling property values inevitably brings.
In short, they are worried that an economic downturn is going to cost them like it did the last time around. The result of this is that a traditional commercial lender will raise the bar for dispensing loans, making it much more difficult, and much more costly, to acquire. As the market becomes more scarce, a lender is more likely to require increasing amounts of collateral or security before granting a borrower a loan.
But how does this affect borrowers who still need to find a commercial lender in spite of the many hurdles? Well, first, as a borrower, you should be prepared to not only work hard, but also to get creative in your search for financing. You might have to look for lenders in places that you had never thought of before.
One place that you might consider pursuing financing is a small, local bank. Not only will they be willing to work with you in a more personal way, but they are often looking for investment opportunities in the local community. It helps both of you if you can say that your commercial lender is someone down the street. This is especially true if you are an account holder there already.
Another strategy would be to consider pulling your accounts from a larger bank, if they have turned you down for a loan. While this might seem slightly underhanded, if you have a significant portion of your assets wrapped up in the bank, they are not going to want to see that revenue stream walk out the door and might make an attempt at trying again with your loan. Be polite about this tactic, but be firm.
What if I continue to receive denials from every commercial lender to whom I apply?
The worst thing that you can do is to give up. Keep at it. Keep trying. You have already done the hard part by assembling all of the paperwork, getting your assets in line and making sure that your accounting team left nothing out. The hard part is done. So plan on applying to different lenders constantly. Even if it takes 100 different applications to 100 different lenders, it will eventually work out. Do not get discouraged and keep pursuing your commercial real estate dreams. In the long run, finding a commercial lender will be well worth it.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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