Let’s assume you need a loan to purchase commercial real estate. Sometimes it’s better to rent instead of buy, but that is a wholly different issue (one I covered in an earlier article; if you missed it, just email me).
So, you go to a financial institution. How do ensure you end up with the commercial real estate loan you need, rather than one a lender wants to sell — or even an outright rejection -- though you might be fully qualified?
Avoid the assembly line
Many large national banks handle loans as if they operated on an assembly line. Employees are specialists in one area — order taking, order processing, underwriting, or decision making. This makes it easier to train personnel, but nobody really knows the whole story. Also, the loan applicant often is left hanging, with no one to speak to about their loan application.
With assembly-line set ups, lending becomes a numbers game. As with the Model T Ford that came in any color as long as it was black, flexibility is eliminated. If your organization does not fit the bank’s first-tier criteria, they’ll go on to the next applicant. And, oddly, for all its “efficiencies,” the assembly-line paradigm actually seems to slow the approval process down.
Look for relationship banking
Look instead for a financial institution that has local decision makers and believes in relationships. You’ll benefit from accessibility, a client-oriented attitude, and an in-depth knowledge of the local business climate.
Customer-centered financial institutions often combine order taking, order processing, and underwriting functions into one loan officer position. This means you have one person evaluating you and your organization “holistically” rather than narrowly. You are more likely to get a loan, and one at a better rate, because the lender is considering your entire situation.
Narrowing the field
You can narrow the field by asking other businesspeople about their real estate loan experiences. Another good indicator is a financial institution offering SBA-type loans. Even if you might not qualify for one, such programs require more work from the financial institution. Participation shows that an institution’s philosophy is solution-oriented rather than an assembly line.
As you begin your search, you probably will think “bank,” not “credit union.” It’s natural — most people hearing hoof beats think “horse,” not “zebra.” While there are many more banks than credit unions, mergers often interrupt the relationship. Member-owned credit unions are more likely to remain independent, and some, like The Island, offer full commercial packages.
If you like what you’ve read in this article, then you’ll probably like the way North Island Credit Union does business. Why not consider us as a possible banking partner? We offer commercial real estate loans from $500,000 to $15 million.