If you are shopping for a commercial real estate mortgage, you have the decision to work with a larger well known bank or a smaller lender that specializes in commercial mortgages. You will notice that approval guidelines are typically more flexible with smaller lenders. The reason is because they are able to take bigger risks. But there are other reasons why you should explore smaller commercial mortgages:
Your application stands out
Since larger mortgage banks have thousands of applications, there is less evaluating each app as a case by case basis. And if your particular situation is different than the average commercial application, there is a higher chance it will be denied.
With smaller commercial lenders, every application is evaluated with the intention of how to close the deal.
Big banks have shareholders to please
Big banks that are public are owned by stockholders, who generally would rather see their shares grow consistently with low risk. This is why banks will not take a chance on alternative or high risk borrowers, because they have more to lose than gain if they anger their shareholders.
On the other hand, smaller commercial real estate lenders are privately owned or owned by a select few shareholders who encourage higher risk lending because it helps their money be put into work.
Small mortgage banks are more responsive
When dealing with a larger bank, particular concerns can get difficult to address to higher ups. Since small lenders usually have the owner or CEO working right along with the loan officers, a borrower can get straight to whoever is needed to voice any concerns. Larger banks have different departments and hierarchies while small lenders tend to get more personal with their potential clients.
Small mortgage lenders have mastered the local market
Everything starts with the local or regional market before going to the big ones. And this is where the small commercial mortgage banks are great at. They have a complete command on the local market and can predict upcoming fluctuations and thus understand the reasoning for your loan better than national banks.
They want your business and will flex their business to do so
If your commercial mortgage application was rejected by bigger banks, your loan application can still qualify with smaller commercial lenders. And many times for similar terms.
The reason is because smaller lenders are looking to earn your business and will do so by being flexible with their guidelines. They are looking at term relationships by working with investors and commercial real estate borrowers. The best way is to do that for them is to meet you at the signing table.