Commercial Realtors, are ugly babies hurting your sales?

BY JOHN PATTERSON – Jupiter, FL

Once a year the Federal Reserve Bank puts out an exhaustive survey report called the Joint Small Business Credit Survey Report. The survey engages the business community and asks them questions concerning their financing and credit needs. The survey provides wonderful insight into the dynamics behind lending within the different Federal Reserve Bank areas throughout the United States.

The survey that was reviewed covered the South East United States. Two finding from this survey that were most interesting revolved around business owners looking for financing to purchase commercial real estate. The survey found…

• Only 36% of those who applied for a commercial real estate loan got approved.
• The majority of business owners only submitted loan applications to 3 banks.

The reason why these two statistics together are puzzling is there are a lot more than 3 banks in most areas. In Palm Beach County, Florida alone there are over 35 different Banks with a local presence in the community. Why give up after 3? The approval rate could have been much higher than 36%.

The reason could have to do with Ugly Baby Syndrome. In the lending world ugly baby syndrome happens when business owners look upon their business as “their baby”. When the business owners make an application for a loan and the loan gets declined the pain is comparable to being told that “your baby is ugly”. After a few lenders telling them that their baby was ugly they quickly got discouraged and stop applying for financing.

Takeaways? Three declines and your deal is dead. That seems to be the magic number of declines a business owner can take before they throw their arms up in the air and call it quits. If you want deals to fund, make sure three declines don’t happen. The best way you can help many of your do-able deals from ever being slapped with these “your baby is ugly” messages is by being actively involved in their loan process.

When you contact your “go-to” lending sources knowing the following information upfront would be a big help:

• How is your borrowers’ credit? (Great, OK, or a challenge)
• What does your borrowers’ tax returns look like? Don’t need to know the actually numbers but do the last couple years of tax returns show good income, little income or losses?
• If your client is buying property for rental income, do they have any history or experience being a landlord? If they are going to occupy the property, how long have they been in business?
• Property info (which of course you already know)

This above information will allow your established lending sources to know before any applications are taken on whether they will be able to help. If the lender(s) need to pass at least you’ll know quickly and can mitigate any possible bad news reaching your clients and keep your clients optimistic. You can used this saved time to refocus your energies on finding the next possible lender who will approve the transaction. If you do nothing and leave it up to chance there is a 64% probability that these beautiful babies won’t get funded. L

John Patterson CFP® is a Co-Founder of The Best Business Loans in Town https://millenix.com/dev/tibblit/ which is a do-it-yourself website for business owners seeking business loan financing. Unique about the site is its ability to shop 20+ local banks for a commercial loan in a span of under 10 minutes. The site does offer a 30 day money back guarantee and guaranteed lowest rate promise. John is a previous Banker with 10+ years of banking and lending experience and he is actively involved in helping businesses find the best deals on their commercial loans.