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Guide to Commercial Mortgage Brokers

Get ready to face a dizzying array of choices
By Jeff Ostrowski

If you're looking to finance your company's new home, you face a wide variety of commercial mortgage options. Decisions include how much you'll need to finance, whether you want a fixed-rate or adjustable-rate loan, and whether to stretch the loan for as little as three or as long as 25 years. A commercial mortgage broker can help you navigate this complex process. A broker works with numerous lenders to help you find the best deal. A commercial mortgage banker's role is similar, although it typically represents a more limited number of lenders.

Here are some tips for dealing with commercial mortgage brokers:

1. Shop around. Ask for referrals and meet with at least three to find a broker who understands your business.
2. Rely on your broker to find the loan that best fits your needs.
3. Expect to pay an application fee of several thousand dollars.

Action Steps

The best contacts and resources to help you get it done

Have the broker come to you By visiting your place of business, your mortgage broker will get a better feel for your enterprise and your real estate goals.

I recommend:  BizJournals offers helpful advice on dealing with brokers.

Discuss down payment Commercial loans typically require a down payment of 20 to 25 percent. However, a variety of loan programs allow for loan-to-value ratios of as much as 100 percent.

I recommend:  Inland Mortgage Capital is among the mortgage bankers that offer 100 percent loans.

Shop online Referrals and face-to-face contact are the tried-and-true methods of dealing with a broker, but you can shop for loans on the Internet, too.

I recommend:  Visit LendingTree Commercial or iBank to solicit bids.

Understand the wide variety of choices Commercial mortgages come in as many flavors as home loans.

I recommend:  Read Crown Commercial Finance's guide and see Column Financial's list of loan programs.

Get a handle on fees Brokers are paid by lenders, but they'll often give referral fees to the real estate brokers who steer borrowers to them. Ask your broker to cut you in on the referral fee.

I recommend:  Crown Commercial Finance offers this eye-opening overview of referral fees.

Consider an SBA loan If you run a small business and need to borrow less than $2 million, ask your broker about a Small Business Administration loan. These loans typically require a down payment of 10 percent. SBA lending is its own niche in the commercial mortgage market.

I recommend:  Study the SBA's 7(a) and 504 programs.

Tips & Tactics

Helpful advice for making the most of this Guide

• Prepare to paper your broker with documents. He'll need to see financial statements that establish your history.
• Expect to see a prepayment penalty on your loan.
• Do your own due diligence: Know current interest rates, don't let your lawyer drag out the legal side of the deal.