An Equal Opportunity Partnership:
Tips for Real Estate Brokers
(This article appeared in the April 2, 1999 edition of the New England Real Estate Journal.)
By Penn Ritter
In the film "Glengarry Glenross," Jack Lemmon plays a commercial real estate broker who's struggling to make sales. Lemmon's troubles are magnified as a rival colleague (played by Al Pacino) makes selling property seem as easy as selling buttered popcorn at the movies.
During the robust 1980s, selling small commercial property was significantly easier than it is today. Whether it was new construction or renovation, property was hot and commercial brokers didn't have to work as hard to sell small commercial buildings. But things have changed. These days, commercial brokers are trying new techniques to move smaller properties. And they're finding success...
A Non-Traditional Lender-Broker Partnership
In the past, brokers could usually count on small business borrowers to find their own financing to purchase buildings. Today, financing real estate is not a cinch. Nevertheless, brokers are in a favorable position to close more deals by working with a non-traditional commercial lender who's equally interested in closing those same deals.
As a non-bank lender specializing in financing commercial property - and as one that makes long-term loans up to 25 years ranging from $100,000 to $3 million - we encourage brokers to line up financing even before making their sales. Here is some broker-friendly advice that will help you help your clients.
Consider a Non-Bank SBA Loan
- Non-bank SBA "preferred" lenders have the distinct advantage of financing loans that are processed faster and that carry flexible terms; SBA-backed loans offer lower monthly payments, which automatically increases a broker's pool of potential clients to purchase more properties. In addition, loans financed through a non-bank SBA lender carry no pre-payment penalty. Borrowers who are in a position to pay off long-term loans earlier than anticipated shouldn't be penalized for their success. With SBA loans, they won't be!
- Borrowers interested in financing more than the purchase of a building can do just that. Partner with a non-bank lender to help your clients find financing for equipment and moving expenses, lease hold improvements, and working capital to grow the business in the new building. This additional financing helps encourage a borrower to buy that building.
Target Franchises
There's no question that brokers are finding buyers in the franchise arena. And just as franchisors are marketing themselves to potential franchisees everyday, the creative broker should consider marketing specific buildings to franchisors.
- To meet the varying goals of prospective franchisees, non-bank SBA lenders offer loans of varying amounts and terms. Most will lend up to $1 million with no pre-payment penalty and with typical terms of 25 years for commercial real estate property.
- Non-bank SBA lenders know the market and they are able to advise prospective franchisees on the balance sheet strength of particular franchisors. And inspiring the confidence of prospective franchisees in their financing terms is critically important.
- Helping borrowers determine the amount they'll need to spur growth - without tying up cash flow - is crucial. To meet the concerns of small business borrowers who may be weary of getting turned down by their bank (where they have accounts), brokers might want to recommend that a borrower do his/her borrowing through a non-bank lender instead. (Non-bank lenders take no deposits.)
Brokers who maintain a creative outlook and who build relationships with aggressive non-bank lenders will close more deals in both good and tough times. Bottom line: A broker's clients need money. A non-bank lender has the money and needs the client. Isn't it time to start talking?
Penn Ritter is a founder and executive vice president of Business Lenders, one of the ten largest non-bank SBA lenders in the country - and the top lender in Connecticut. Headquartered in Hartford, Business Lenders has Northeast-based offices in Boston, Providence, New York, and New Jersey. Business Lenders can be reached toll free at 877-345-6267 or via the Internet at www.businesslenders.com. Penn can be reached at pritter@businesslenders.com.
