Loans For Love

OK, that is admittedly an odd title for a commercial lending related post, but I had to tie this post to Valentine’s Day somehow, right? Yes, gentlemen… Valentine’s Day is quickly approaching and if you haven’t planned for it, you’ll be paying a premium for those roses, chocolates, and good luck getting a good seat at Mastro’s Steak House!

And that allows me to segué into my “lending” topic: Planning, specifically as it pertains submitting a commercial loan request. One of the most difficult aspects of being on the lending side is getting “piecemealed” on the information that we need to make a realistic decision on interest in the transaction and pricing. This represents a lack of “planning” from my perspective.

This is especially apparent in “fast funding” situations. There’s an old saying: “A lack of planning on your part does NOT constitute and emergency on my part.” Pulling documents one at a time out of a broker or borrower does not bode well for a quick close. So what does it mean to “plan” for a submission?

I would suggest at the very least that you have the following prepared and ready to sent to a lender:

  • A well prepared and complete Executive Summary describing the transaction clearly, no more than 2 pages of text, with pictures.
  • The guarantor(s) Personal Financial Statement, Schedule of Real Estate, and Credit Report.
  • If a purchase, the Purchase and Sale Agreement and Offering Memorandum.
  • If a refinance, SOME validation of value (either comps, a recent BPO, or an appraisal) and a breakdown of equity injected into the project.
  • A Use of Funds Statement.

All of that should pretty much describe the transaction in enough detail for a lender to provide a realist and quick response on pricing and closing time. Yes, it means more work on your part… at first. However, you’ll find that when shopping for good loan alternatives, this approach will save you a HUGE amount of time an headache.

Now gents… get out there and get those flowers, chocolates, dinner reservations, teddy bears, and anything else to let your special someone know just how special she is!

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender who has been in the commercial real estate lending business since 1993.

The “Three Lender Rule”

If you broker loans for a living, whether commercial or residential, you’re only as good as the lenders with to whom you submit those loans. If you’ve been in the business for any length of time, then you know that your enemy is “time.” Your lenders are constantly change their guidelines, loan appetites, credit boxes, submission procedures, etc. all the time. Staying on top of those changes so that you can be an effective resource to your clients, is almost a full time job in itself.

Let me introduce you to the “Three Lender Rule.” I discovered this in my brokering career by accident. Basically it says that if you submit your loan request to multiple lenders and THREE of them give you essentially the same answer (accept or pass), then that will represent roughly 98% of all lenders to whom you submit that transaction. So what’s the take away and how do we leverage this for success.

First, you can use this as an effective time/loan management tool. If you get three “no’s,” then it is probably a good idea to let another broker waste HIS time on that loan while you focus on another one. (I’m not saying that this rule is perfect, but if you’re managing a large pipeline, then it’s a VERY good rule of thumb). Or give it to an assistant to try to find that lender exception.

Second, you can use the rule to develop a very effective Lender List. Now you know that you can pick 3 bridge lenders, 3 multifamily lenders, 3 office building lenders, etc. until you have a full grouping for those types of properties in which you care to specialize or represent. This magic number is also much easier to stay on top of then say 20 bridge lenders, 15 self storage lenders, and the like. Yes, have some back-ups, but keep 3 “top tier” lenders for each category of property you like to finance.

Last, you will find that giving most of your attention to fewer lenders will result in getting better concessions and exceptions from those lender when you really need them. Loyalty can provide you with rewards when you need them.

Next week I’ll discuss how lenders are more important to you than borrowers with regard to growing and maintaining your loan brokerage business.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com. We also offer educational, interesting, FREE Reports for industry professionals and investors: Click Here to get yours. And Click Here to obtain free Broker-specific tools.

Successful Executive Summaries

When is a commercial loan “summary” not a summary? When it turns into a book, of course. Or when it showed up as only a few sentences. So perhaps the better question to ask is: “How much information should you include in an Executive Summary?

The purpose of an Executive Summary is to present to the reader (presumably a lender or investor) the important FACTS of the transaction in support of the loan request. When you consider that a typical lender may receive 20 to 50 requests for financing PER DAY, you can see that both brevity and impact are important in crafting your request. Also remember that everything you put INTO the Summary needs to be supported by all of the documentation you collect from your borrower.

We start with an overall description of the transaction wherein the first sentence is a “summary of the Summary.” Do NOT forget to have a compelling picture on the first page. Pictures sell far more than to the dry facts. In the Transaction Summary, also remember to lay out the purpose of the financing, the borrower’s motivation, and how value is derived. Finally, include a “Use of Funds” statement.

The next section describes the sponsorship (humans) behind the transaction including net worth, liquidity, credit, and a short biography. The more experience your borrowers have, the easier it will be to obtain financing.

Now we split: Is this a refinance or a purchase? Each type of transaction has its key points, with actual “cash in the transaction” being the key component. Skin in the game is what lenders prize most so make sure that this is described in detail, particularly in cash out refinance transactions.

The next section covers any construction or rehabilitation to be done to the property as part of the loan request. Soft costs, hard costs, reserves (interest, hard costs, TI, and/or leasing) and closing costs should all be laid out… clearly.

Last, but not least of the descriptions, here you can include property facts such as building size, lot size, zoning, parcel numbers, etc. At the end of the summary, include MORE pictures of the property, a map, and maybe a satellite photo from Google. Brokers can get one of our summary templates by signing up: Click Here.

Next week I’ll discuss how to pick good lenders to add to your “list” so that you can service your clients more effectively.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com. We also offer educational, interesting, FREE Reports for industry professionals and investors: Click Here to get yours.


Questions To Be Asking

Last week I discussed the importance of the Executive Summary, the first document to send to a lender and the last document you create in your loan file. This week I want to give you a few very important questions to be asking at the outset of a potential financing to help you discover if you should give a particular request priority or even pass on it all together.

So you get a call from a prospective borrower and he/she starts to run through all the really great reasons why you should give him 110% LTV, interest only balloon note financing on his outhouse in Podunk. This is where you step in and ask these questions:

  1. How much is your property worth and how did you determine that? (Is there real value here?)
  2. How much do you owe on the property and are you current on your loan(s)? (What kind of trouble is this borrower in and is it even possible to finance him?)
  3. Where is the property located? (Are you in downtown LA or in Podunk… guess which is easier to finance?)
  4. What is your motivation for getting this loan? (Gets to WHY they need the money.)
  5. When do you need to close on the loan? (Gets to HOW motivated they are to get financing.)
  6. What are your credit scores? (Again, do you have problems you have to solve?)

First, notice that these are all open-ended questions. The prospective borrower can’t give you a Yes or a No. He’s got to tell you the story. Can you see how these questions will give you enough information to make a determination on whether to proceed?

I’m not suggesting that you turn down a tough to close if you know what you’re doing. You can make real money on tough loans because they ARE tough. It’s simply better to know up front what you’re getting into.

Next week I’ll elaborate more on the Executive Summary and its structure. The better you craft this document, the better your chances of getting initial interest in your loan request.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com. We also offer educational, interesting, FREE Reports for industry professionals and investors: Click Here to get yours.

Executive Summaries: The Alpha & Omega

What do you really have to do to get a commercial loan approved and funded? Dragon Realty Capital is a direct lender. We take loan submissions from mortgage brokers, loan officers, and banking professionals. What we notice in this process is how FEW of these lending professionals seem to know what it takes to present a loan to a lender in a way that will actually get it funded!

Dragon will be sponsoring a series of commercial broker training and industry networking seminars in 2019. In support of that, we’re putting together a series of blog posts that previews some of the key elements of that training. We hope that you find the information useful in your practice or in understanding the commercial lending process.

The first installment involves the Executive Summary. Ironically, while it is the FIRST document (Alpha) that you send to a lender it is the LAST (Omega) document that you prepare before sending in a commercial loan request to a lender. From its name you should get that is “summarizes” the loan request. Before you can prepare an effective one, you need to do some work!

You’ll need to understand the history of the transaction (how did you get to the point of needing a loan?). What is the motivation for the request? What’s the timing or urgency to close? What kind of property is it? What is its Net Operating Income, who occupies it, where is it located, and what kind of shape is it in? What about the guarantors? Who are they, what kind of experience do they have, what’s their credit like, and how much money do they have in the bank? And there are even more things that go into a good Executive Summary.

We send our brokers a template for creating one on each submission that does a pretty good job of laying out the story. You can get one for free at any of our Loan Program pages under the Loan Programs tab here: www.DragonRealtyCapital.com. You can also get some good, FREE information on other aspects of commercial lending and marketing by Clicking Here.

In the next installment I’ll cover the first few questions that you should ask ANY borrower to see whether or not you’re wasting your time on a potential loan request.

Craig Higdon is the Chief Executive Officer of Dragon Realty Capital, a nationwide private money direct lender. More information can be found at www.DragonRealtyCapital.com.

SBA Shutdown Rescue Funding!

The Federal government shutdown has affected commerce in an unusual way:  The SBA is not open to fund loans to US businesses, leaving them without the capital to expand or stay open! 

Dragon Realty Capital has both real estate and non-real estate based funding options for businesses that can close QUICKLY!  Don’t hesitate!  Call or email us now to get the funds you need for your business that the SBA can’t deliver because we don’t know how long the shut down will continue.

CONUNDRUM: PLACE A LOAN WITH A COMMERCIAL BANK OR DRAGON REALTY CAPITAL?

Did you know that commercial banks can be moody and unpredictable?  It’s true.  For example, one moment they might love loans on self-storage facilities, and the next moment (usually after taking a loss on one of the darlings) they wouldn’t touch a self-storage facility with a ten-foot pole.  

Another reason for the wild mood swings of a bank is liquidity.  If a bank is fully-invested, even the tiniest “hair” on the transaction is a killer.  A hair is a flaw in a commercial loan request.  And here is no such thing as a perfect commercial loan.  Every commercial loan ever funded had some hair on it.

However, if a bank has received a number of loan pay-offs and is sitting on a pile of uninvested cash, the pressure to lend is tremendous.  If you catch the right bank at the right time, one loaded with liquidity, you can even finance an axe murderer!  So how do you KNOW when a lender is ready to lend?

Now there is no way for an investor or a commercial loan broker to know a bank’s mood in advance.  However, if you place your loan request with Dragon Realty Capital, you’re no longer subject to the moodiness.  Dragon Realty Capital has established relationships with both bank and non-bank loan investors such as hedge funds, family offices, and private investors around the USA.  We know who is looking to lend on what TODAY because they tell us… daily.  

So, you can do it the hard way – present your loan to at least 15 banks, three at a time, or do it the EASY way – send your request to Dragon.  If all 15 banks turn you down, (do NOT be surprised if they do), then you’re 5 weeks behind and have no money in your pocket.  Banks don’t lend like they used to, thank the Dodd-Frank act for that.

I use a similar business plan when placing my private money commercial loans with our private investor network.  I prepare a detailed Executive Loan Summary and then place it in front of our VETTED wealthy investors and funds with whom we have established long-term working relationships. On any given day, many of them have money that they are looking to place.

In review:  Plan on submitting your near-bankable commercial loans to fifteen banks or go with funding power of the Dragon.  To submit a loan or loan scenario to Dragon Realty Capital, Click Here, or send your scenario to me at Robert@DragonRealtyCapital.com.  Finally, you can reach me at 888-578-5441 x83.

Robert McCarthy is the Chief Lending Officer of Dragon Realty Capital and has over 29 years of private money and commercial lending experience.  Brokers, Bankers, and Trusted Advisors can access free marketing white papers at www.DragonRealtyCapital.com/reports.

Things to come at dragon

Dragon Realty Capital is looking forward to 2019. 2018 was our first year and we learned a great many things… not all of them good! We will be implementing changes this year to better serve our primary referral sources: Mortgage Brokers, Bankers, and other Lenders. We will also be expanding our technology base to deliver loans faster and more efficiently to our ultimate clients: Commercial Real Estate Investors.

We have set up a number of excellent correspondent relationships and continue to seek additional Investors for a wider range of commercial loan offerings, nationwide. Our cloud-based loan origination system will allow our partners to enter, update, check status, and deliver conditions faster than ever before. We are also streamlining our initial documentation requirements, the one area that everyone HATES! Hey… we get it. We were brokers once.

Finally, we are going to usher in a COMPLETE commercial lending Training and Coaching Program. We’ve offered a complete commercial brokerage course and support materials since day one, but we’ve realized that the two critical components to actually DOING a great job of getting commercial loans funded quickly are missing from that: The first is hands on training with the materials. The second is ongoing support and interaction with other successful originators around the country. We will soon formally announce programs that meet both of these industry needs.

Finally… be on the lookout for two fun and informative additions to our “outreach.” The first will be a series of videos called “The Mortgage Minute” featuring the Mortgage Black Belt and a whole lot of martial arts demonstrations linked to lessons and wisdom to be applied in the commercial mortgage industry, often done “tongue-in-cheek.” The second will be a Coaching Program feature called the “Dragon’s Den” that will allow originators to find our in very short order if they have a transaction worth pursuing. It will NOT be for the faint of hear. Will you dare to enter the Dragon’s Den? Watch for more posts to find out…

How to ‘Care’ for Clients in the Social Media Age

Today more than ever, we must increasingly focus on reaching out to our clients in a meaningful and relationship building way.  So how do we do this in the best method possible, during an age when communication has become completely digitized, and the speed at which we communicate with one another is now faster than ever?  The reality is, there are significant challenges to maintaining excellent ‘Care’ for our clients in the Social Media Age.

So, who do we need to focus on in order to maintain consistent ‘Client Care?’

  1. Referral Contacts are key.  Referrals are golden opportunities, and require significant and consistent follow up.
  2. We must have a system in place to keep tabs on referrals and grow our referral networks as quickly and expansively as possible.
  3. It is essential that we become an expert resource for our clients, and extend that expertise to our referral base, while at the same time running the day to day of our businesses, and doing what we love.
  4. And lastly, we must take better ‘Care’ of our clients than our competitors could ever dream of.

Sounds like a lot doesn’t it? Well, it is.  But the fact of the matter is that if we don’t keep up and get in front of client ‘Care,’ by setting the bar of expectations for our clients ourselves, we will find our competitors setting the bar of expectations for them instead.

So, how do we resolve this challenge?  We look for solution. And the Good News is I’ve found one.  Read closely because what follows are the key components you need to tackle this very issue.  I have found a network that will:

  • Build your bank of referral sources for Client Care rapidly and measurably.
  • Help you position yourself as the “Expert” in your field among your clients, distinguishing you from your competitors.
  • Put you in front of your client referral sources regularly andautomatically.
  • Build a Fence” around your client referral sources that your competition will be unable to penetrate.

And it ‘s easier than you may think. To find out how, download our Special Report:  https://www.dragonrealtycapital.com/free-marketing-report/

How to Nurture Your Warm Leads Effectively

The ultimate goal for any business is reach its highest best potential  and connect meaningfully with Referral Contacts, but fact is, we do face some real challenges as professionals in business for ourselves:

What so you really need to know to nurture your warm leads effectively?

  1. How to engage with your customers and prospects with ease and efficiency
  2. How to engage your contact sources and position yourself as the expert
  3. How to promote relationships consistently using referral sources so you can get on with doing what you do best
  4. How to keep your competition at bay

And the Good News is… you’re looking at the solution. I have found a network that will:

  • Build your bank of referral sources rapidly and measurably.
  • Help you position yourself as the “Expert” in your field, distinguishing you from your competitors.
  • Put you in front of your referral sources regularly and automatically.
  • Build a Fence” around your referral sources that your competition will be unable to penetrate.

To find out how, download this FREE Special Report:https://www.dragonrealtycapital.com/free-marketing-report/

1-888-578-5441