Remember that many sales brokers and their agents, anxious for a sale, are contacting banks directly on behalf of a client. This is a major mistake. Banks do not want to deal with sales persons. They, for the most part, want to deal with licensed mortgage brokers who are registered as official brokers for the bank. Commercial realtors and sales agents should sell, not try to be a mortgage broker. States are coming down hard on such individuals, and in one state, effective January 1, 2010, (which is less than 6-months away) any unlicensed person representing a lender, or assisting borrowers with loan modifications can be subject to a $1,000 per day fine if continuing to do so. Licensed mortgage brokers go through continuing education and must pass tough tests. Licensed sales persons should go through a certified bank rep (like me) or run the risk of finding trouble.
I will have more for you, in my upcoming reports, more on this and will have a very hard-hitting report on the merits of conventional commercial financing, vs SBA 7a financing vs SBA 504 financing.
The number of commercial loans being approved continues to be at a 10-year low, based on factors covered in my earlier reports.
Here are the chief reasons why banks say "no."
Ø Debt to Income Ratio (DTI) is insufficient (see information on this atwww.sbafacts.com)
Ø Spouse credit score is insufficient
Ø Management experience is weak
In these troubled banking days, DTI is among the biggest killers of deals.
If you have a buyer, or are a buyer of a commercial business, with or without property, do not contact me unless you have a full credit report (Equifax preferred) on both the applicant and spouse.
Study that report carefully, see what the average monthly obligations are per month. Calculate the DTI. It is historic (2-year) personal income average, divided by the personal debt from the credit report. We need 0.4 or lower. Then, there must be evidence that the applicant can make payments based on the cash flow of the business, and the loan amount.
Over 90% of my readers are commercial realtors, business brokers, or agents in the commercial marketplace. About 10% of my readers are residential realtors who are moving into the commercial sector. Most residential persons understand the DTI, and will appreciate that is 0.4 for commercial.
If you have any questions - visit my website: http://www.robertjrussell.com or call me 972-679-9029
