Commercial Loans Blog

Mortgage Brokers Should Stick to Small Commercial Loans

Posted by George Blackburne on Tue, Nov 1, 2011

If you are a commercial mortgage broker and you're struggling, you should probably only work small commercial buildingon small commercial loans.  Large commercial loans rarely close these days.  Here's why:

To close a large commercial loan today, you will pretty much have to work with a bank.  There are no large hard money bridge loan funds anymore.  I am talking about subprime (hard money) mortgage funds of $150 million or larger.  They all kaput, wiped out by commercial real estate depression that started in 2007.  (If anyone knows of a large commercial morgtgage fund that is still doing deals, please write to me at george@blackburne.com.)

Now a number of smaller commercial mortgage funds have started up since the real estate depression began, but most of them are still fairly small.  Remember, most funds have operating agreements whereby the sponsor of the fund is not allowed to add any loan to the fund that is larger than 5% of the total fund balance.  This means that if you were trying to place a $15 million bridge loan, you would have to place it with a fund of at least $300 million.  I am not sure there are any surviving mortgage funds that large.

This means that you will have to try to place your $15 million deal with a bank.  Yikes.  Good luck on that.  You could easily shop the deal to 40 banks and not find a single one in the mood to make a $15 million loan today.  And if you can't place your deal with a bank, you're stuck.  You have no reliable hard money lender waiting in the wings.

But if you work on small commercial loans, and 40 banks turn your deal down, you can always take your $750,000 deal to a hard money commercial lender like Blackburne & Sons.  All of your effort trying to place the deal with a bank will not have been in vain.  At least you will still close the deal and get paid.

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Topics: Smaller deals