Commercial Mortgage Loans Without Banks

Traditional banks serve a very important role. Nevertheless, when it comes to commercial mortgage loans, there are over a dozen reasons to consider a source other than a traditional bank. For most business owners, five or more of these reasons are likely to be applicable. With many business loan borrowers, banks have already declined their loan application. That particular compelling reason to use a source other than a traditional bank (being declined by a traditional bank) is not included in the list below. Here are 14 reasons a business owner might not go to a traditional bank for commercial mortgage loans.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 1

The minimum commercial real estate loan for many banks is $250,000 or more. With non-bank business lenders, the typical minimum for commercial mortgage loans is $100,000.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 2

Most banks charge an up-front commitment fee. Most non-bank business lenders do not charge an up-front commitment fee for commercial mortgage loans.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 3

Most banks will severely limit the amount of cash a business borrower can get when refinancing commercial mortgage loans. When a borrower is refinancing their business property with non-bank business lenders, they can typically get up to $1,000,000 in cash.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 4

Most banks are reducing their interest in properties such as bars/restaurants, auto service businesses and funeral homes. Non-bank business lenders are very interested in these business categories (and many other special purpose properties) for commercial mortgage loans.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 5

Most banks will require business plans for commercial mortgage loans. The cost to provide this is usually several thousand dollars. Non-bank business lenders typically do not require business plans as part of their underwriting process for commercial mortgage loans.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 6

Most banks will require tax returns for commercial mortgage loans. Non-bank business lenders do not require tax returns or any income verification for a Stated Income commercial real estate loan. Many banks not requesting tax returns will ask borrowers to sign IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS). Non-bank business lenders typically do not request borrowers to sign this form.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 7

Most banks will require cross collateralization of personal property for commercial mortgage loans. Most non-bank business lenders do not require cross collateralization of personal property for commercial mortgage loans.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 8

Most banks will require balloon payments or the loan will be subject to recall after periods as short as 3-5 years for commercial mortgage loans. With a commercial real estate loan via typical non-bank business lenders, properties are eligible for 25-year loans and some up to 40 years.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 9

Most banks will not permit seller seconds or secondary financing for commercial mortgage loans. With many non-bank business lenders, if the business borrower uses a seller second or other secondary financing for a commercial mortgage, the business borrower can obtain a loan with a combined-loan-to-value up to 95% of the property value.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 10

Most banks require income verification or audits even after the commercial real estate loan closes. Non-bank business lenders do not verify income either before or after a commercial loan closes with a Stated Income business loan program.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 11

Most banks have strict guidelines for "sourcing" or "seasoning" of assets or ownership to qualify for commercial mortgage loans. Most non-bank business lenders do not have any requirements or limitations involving sourcing/seasoning of funds or seasoning of ownership.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 12

Very few banks offer assumable commercial mortgage loans. Typical non-bank business lenders have an assumable commercial loan program which includes loan amounts up to $1 million.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 13

With most banks, a typical commercial real estate loan will require 3 to 9 months to close. At typical non-bank business lenders, most commercial mortgage loans close in 45 to 55 days.

COMMERCIAL MORTGAGE LOANS WITHOUT BANKS REASON # 14

Very few banks use Stated Income (no tax returns, no income verification) for a commercial real estate loan. Non-bank business lenders use the Stated Income approach for commercial mortgage loans in their Stated Income business loan programs (most commercial mortgage loans up to $2-3 million qualify for these programs). This especially benefits self-employed business borrowers who frequently have income that is erratic and difficult to document properly.

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