Commercial Real Estate Loans - Finding The "right" Lender
By Christopher Carter




We recently closed a medical office building loan in Michigan, it was a cash out refinance with a loan amount of $2,300,000. It was a challenging loan for both the Doctor and us because of 1. The general weak condition of the capital markets in general, and exasperated by an even weaker Metro Detroit/Michigan market. 2. The Doctor only showed $36,000 of personal income. 3 His credit score was 638.

The main solution was to find the right bank and one that had to be aggressive. They needed to not be over saturated in the Michigan market. And have a strong preference for owner occupied deals. Local banks have been so beat up that if the loan request isn't perfect, they just won't do the deal. Many local bank are completely focused on reducing their loses and are not even looking at new deals.

Finding a bank that was willing to look at a loan request in Michigan was one thing, but another to consider a borrower with a credit score at 630. Due to the Doctor occupying more than 51% of the building made him a contender for SBA financing. Sometimes with SBA guarantees a few lenders are willing to fund loans even with scores in the low 600's, as this was the case and the solution to this problem.

The personal cash flow was an entirely different issue and one that I thought would potentially kill the deal. The borrower showed $36,000 as his personal annual income with over

$120,000 per year in personal debt. Many banks will deny a loan for this as it shows that not only is the borrower potentially not making enough money but more accurately that the borrower is not paying themselves in the right fashion. In this case the doctor was paying himself out of his bank account and not paying the required personal income taxes. Underwriters just look at this as being sloppy and in most cases it will become a red flag and be considered a character issue.

The funding bank recognized that the Doctor was making enough money to support his personal debt as was shown on his business tax returns and simply over looked the improper personal income tax reporting issue.

In many cases with difficult deals finding the right bank for the given loan request is most important. And that doesn't just mean finding the most aggressive bank, it means matching up your loan request with the right bank or lenders appetite. Many times the right bank is across the country so it pays for the borrower to be thorough and patient as they search for loan options.

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