Thirty-five years ago, when I first founded Blackburne & Sons, I had never closed a commercial real estate loan. In other words, I founded a commercial mortgage company before closing my very first commercial mortgage loan. Pretty audacious, huh? Today my commercial mortgage company is one of the oldest commercial mortgage companies in the country, and it services over $41 million in private money commercial permanent loans. You will recall that a permanent loan is just a garden variety first mortgage on a commercial property.
Therefore it is not as audacious as it sounds when I say that I am founding a business loan brokerage company today, despite the fact that I have never closed a single business loan. I am going to learn the business as I go, and I am going to share everything I learn with the public using this blog. My sons and employees will learn the business with me by studying this blog. You can too.
First of all, what do I mean when I say "business loan brokerage"? A business loan - as opposed to a commercial mortgage - is a commercial loan secured by something other than commercial real estate. A commercial loan could be an unsecured loan to a business or a loan to a business secured by the personal property owned by the business. By the way, personal property does NOT mean private property. It doesn't mean my personal stuff, like my underwear. Personal property is a legal term of art that means every kind of property other than real estate. Real estate is land and that which is affixed to the land.
I don't know if you caught it, but I slipped from business loan to commercial loan in the above paragraph. You will recall that commercial is just a fancy word for business. They mean exactly the same thing. Therefore a commercial bank is a bank that makes business loans (in other words, a garden variety bank), as opposed to an investment bank, which makes investments (buys and sells stock investments).
Business loan brokerage is the business of placing business loans with banks and finance companies for a commission, and very few states, if any, require a license to broker business loans. This is huge. This means that if you got financially beaten up during the Great Recession, and it is now impossible for you to get a mortgage broker's license, you can still earn a living brokering business loans.
Here's another reason to get excited about brokering business loans. Business loans close fast. Most business loans close within two to three weeks because there are no appraisals to obtain. Some business loans have closed in less than one week. Compare these times to the 60 to 120 days required to close a commercial real estate loan!
So how am I going to learn business loan brokerage? I intend to have my staff (my oldest son George IV initially) interview scores and scores of business loan lenders and business loan brokers in search of answers to the following questions:
- Quick Screening Questions. No loan officer wants to waste time processing a commercial loan request that has no chance at all of closing. There are surely quick questions that an experienced commercial loan officer will ask the borrower in order to pre-qualify him. So what items of information will a lender want to know upfront in order to quickly pre-qualify the commercial loan request?
- Initial Loan Documents. In a preliminary package, what documents will a commercial lender need to see so that no one wastes time pursuing an undo-able deal.
- Loan Pricing. How are commercial loans typically priced today? Are they fixed rate? Adjustable rate? What's a good price? What price is an outrageous gouge?
- Recognizing Do-able Deals. What does a good deal look like? What situations or conditions make a commercial loan tougher or absolutely impossible? How do you tell a good deal from a bad one?
- Brokerage Fee. What kind and size of fee should a business loan broker charge?
- Underwriting and Financial Ratios. How are business loans underwritten? What financial ratios do business lenders use? What is a good ratio? What is an unacceptable one?
Someone from C-Loans, Inc. - probably my son George IV - will blog on each one of the above subjects. Some of the subjects, especially underwriting and financial ratios, will almost certainly require several blog articles.
But not every business loan is the same. There are a number of different types of business loans, and my staff will have to blog on each of the above topics on each of the types of loans described below:
- Equipment financing.
- Equipment leasing.
- Accounts receivable financing.
- Inventory financing.
- Asset-backed lines of credit.
- Lines of credit.
- Unsecured business loans.
- SBA 7a loans.
As you can see, we have our work cut out for us. I envision about 60 blog articles before we are finally through. But you can also see that if we answer all of the above questions for you about all of the above different types of business loans, you will really know your stuff.
And remember, this training is free! Just follow along.