Commercial Lending: Get Past ‘No’

Ten ways to convince the loan committee to say ‘yes.’

September 1, 2012

Have you ever run across a situation as a commercial loan officer where you’re looking at an owner/user commercial real estate deal that makes perfect sense to you—but your loan committee doesn’t want to do the deal for one reason or another?

There are many reasons a loan committee may say no to a deal you believe in. Let’s explore my top 10:

1. The lender's belief that it must do 65% to 75% loan-to-value transactions for owner/users.

2. The belief that it's too much trouble to deal with the SBA.

3. Lack of comfort with the 504 loan program’s 90% loan-to-value requirement during the bridge period until the CDC/SBA buys them out.

4. Some deals are too big and the institution has capital restrictions.

5. Some lenders won’t lend on certain industry classifications.

6. The loan doesn’t match the lender's internal credit criteria.

Solution: Lenders can now sell loans for most credit criteria using one of the options available in the secondary market, assuming there’s CDC and SBA approval of the corresponding debenture.

7. The lender decides to sell a loan to a secondary market player and gets declined. This can happen because each secondary market lender has its own criteria. Some look only for higher credit quality deals or certain asset types.

Solution: Try another secondary market player. Or take the deal somewhere that offers a variety of options all at once.

8. The lender can’t offer rates that meet or beat its local competition.

9. The lender can’t match the competition’s terms.

10. The lender only does 7(a) loans because the premiums are better than for other loans.

We know what’s better for the borrower—and that’s our mission. We want borrowers to succeed so they can flourish, create jobs, and stimulate the economy, right?

So now you know what to do if your loan committee doesn’t want to do an owner/user commercial real estate deal. Many options exist to help you get past “no.”

KEN ROSENTHAL is senior advisor of lending, education, and training for CDC Capital Markets. Contact him at 858-967-7817.