Work Better In Agreement
Reach a healthy level of communication and involvement with your lenders
Andrew Bogdanoff, president, Remington Financial Group
As published in Scotsman Guide's Commercial Edition, January 2008
The commercial lending world is complicated, but one aspect doesn't need to be - the broker-lender relationship. In fact, by investing some time and attention, you can grow this important relationship and be rewarded throughout many future projects together.
Whether you're a part-time broker who passes full responsibility to the lender or a seasoned broker who prefers to have a hand in all levels of the process, the need to collaborate with your lender during the financing process remains consistent.
It's vital that you determine early in the process which party will take the lead in the client relationship. Either of you may choose to manage communications with the clients exclusively. Or, you may decide that each of you will manage some specific portion of client communications. Any
of these choices are appropriate, but you and the lender must agree to a communication plan so that you don't muddy the water by communicating with clients on the same items.
Brokers who decide to manage or take part in communication with the clients during the application process can benefit from two things:
- Working with lenders to understand their applications completely. Brokers should complete mock applications to vet out any issues.
- Insist on completing applications yourself on behalf of your clients. This requires a question-and-answer session with clients. It is more work than having clients complete the process themselves, but the rewards for this level of work can be tremendous.
Maintaining regular communication with the lender during the application process is also important. This helps you remain in a comfortable position should the borrowers stump you with a tricky question. By not over- or under-promising, and by instead securing an answer directly from the lender, you can avoid upsetting the clients or the broker-lender relationship.
For those brokers who want to be more involved in the funding process, gathering documentation is an important area of participation. To start this, ask the lender for a list of items that are required for any given venture.
To speed up the process, submit that list to your borrowers. Then help them assemble the required documents. These can include appraisals, market-feasibility assessments, tax returns, financial statements or environmental studies.
Again, the strength of your relationship with the lender plays an important role during this phase. A good lender can train you in what needs to be collected and how it should be submitted. With this knowledge, you can better control the documentation process and ultimately provide significant value once the deal moves to underwriting.
As part of this documentation process, you can also help create an executive summary about the deal. This summary should detail specifics such as:
- How much the clients want to borrow;
- What the funding will be used for;
- The timing of the endeavor;
- Other sources of funding; and
- Projected closing dates.
Pulling together this detailed information in a concise document can be a tremendous help to the underwriters. A smart broker and a good lender can work in conjunction to determine what information is necessary and work together or separately to collect the information.
Many commercial funding issues can be resolved by creating a strong relationship with your lender. Ultimately, a good lender should be devoted to collaborating with you and to providing you with adequate assistance.
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