Benefits of Using a Commercial Loan Broker

At Commercial Lending X (“CLX”), we field a lot of questions about different consulting services for loans. We wanted to provide some clarification about the loan broker process and what we feel you should keep in mind if you decide to move forward with a loan broker.

To provide some background before I start, I have spent my entire career in commercial lending having started on the banking side. I have seen the Commercial Loan Brokerage world from both sides of the table, both as being a lender accepting deals from loan brokers and now as President of Commercial Lending X (“CLX”), a loan brokerage shop with over 500 funding partners that has been in business for 15 years. Our core focus at CLX is being sure our clients get the educational assistance and guidance they need to not only secure the right financing but also to be sure their deal can ultimately be successful and get financed. Just because a lender is willing to finance a deal, that does not mean that transaction or that the financing offer related to that transaction is a deal the buyer should be taking on. Ultimately we want to be sure our customers are successful with what they buy and how they finance it. With over 100 years of combined banking experience here at CLX, we know how to identify bad deals just as well as good ones, and we help our clients identify the right deals and get financing done that will ultimately make them successful.

There are a lot of people offering loan consulting and brokerage services. However, we do field a lot of calls with potential clients that have gotten incorrect information from some of these sources. There are some things I think you need to consider when using a broker.

1. 1) What is their experience level? There are plenty of people who think brokering commercial loans is easy, but it is not. It is not hard to make some introductions between a borrower and lender, but in order to broker loans properly you need to have a deep understanding of credit, financial statements, underwriting, banking, etc. You need to have experience actually working loans through the process from start to finish including knowing how to work with lenders and solve problems that come up from approval to closing. You need to be sure the individual working on your loan has the experience to actually help you. If they do not understand all of the nuisances of commercial financing you may not end up securing a loan or you could end up with the wrong loan product or wrong acquisition structure, making it that much harder to be successful.
   2) Be wary of people looking to charge an upfront fee or fee upon approval instead of closing. A good loan broker is going to earn their fee on the successful conclusion of a transaction. The only reason to charge a fee up front is if the broker is not confident they can get the deal done.
2. 3) A good broker should not just take your deal and run with it. They should be able to help advise you on structure and have the hard discussions with you up front about what will and will not work. If they take the deal you have without advice, there is a good chance that deal could get modified or even denied in the loan approval process. A good broker will understand what can and cannot get approved and will educate you on all options available in the market.
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4. 4) Interest rate is not everything. Although we know the interest rate is important to our clients and we are always focused on getting them the best interest rate possible, it is equally important to get with a lender that will be a good partner and who you can be confident can close your deal in a timely fashion. Sometimes the best deal for the client or the best lender for the client is not offering the best interest rate.
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6. 5) Be sure the term sheets you get have been vetted by the lender credit team in advance. We require all of our lenders to vet deals through their credit or management team in advance. Because of that we have a 95%+ success rate of our term sheets turning into loan approvals absent something undisclosed by the seller coming up during the approval process. If there are credit risks on your transaction they should be addressed up front before the term sheet is issued. Hiding them does not work because they will eventually show up in underwriting and risk killing or changing your deal later. You need an experienced broker that knows how to address these types of issues in advance so you do not have any surprises later during the underwriting process.
   6) Be sure the firm you work with has someone you can actually communicate with and that can help you get your deal done. Having access to lenders only provides some value. Knowing who the good institutions are and who the good lenders are at those institutions is very important. We have fired just as many individual lending officers over the years as we work with today because they were not responsive, honest, or incapable of getting deals done they said they could get done, and we no longer work with several institutions as well because their processes are terrible. Also, having a broker that can underwrite the deal and get it in front of the right lenders, helping you get the deal positioned the right way ultimately provides you with more value than a bunch of random phone numbers and contacts. If you are paying a fee for a service, you should want as much as you can get from that service. Lenders are constantly changing what they do and although a lender might approve one deal structured one way for one client, they may not do the same deal for another client. A broker needs to be in constant communication with their lenders and involved in the process to understand what the lenders really will or will not do.
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8. 7) The broker should not disappear once your loan is approved. They should be there for you throughout the entire closing process to answer questions, help you collect closing documents, review updated financial statements, and assist you in getting your loan to closing. The rubber really hits the road during the closing process and there are a lot of things that can come up that need attention to be sure a deal does not fall apart. A good broker should be able to help you through this process.

Hopefully this information is helpful. I know this post is somewhat self-serving as we are a Loan Brokerage shop ourselves, but whether you use CLX or another seasoned broker, here at CLX we just want to be sure you know what to look for and understand the value a broker can bring to the table. I would encourage you to check out our proven process that we have honed over 15 years of commercial lending experience here: https://www.commerciallendingx.com/the-clx-way. We would be happy to look at any deal and provide you feedback, whether you have an LOI or not. You will always get an honest up front approach from CLX and if we cannot do something we will tell you up front. At CLX we have our own underwriting department in-house and we underwrite all deals in advance to secure the best results. We also have a team approach and never leave our clients out in the cold. If you have any questions you can reach me directly at redacted Good luck with your search.