Non-Bank Lending Is the Solution for Small Business CRE Loans

Strong demand for capital in the commercial real estate sector is expected to continue for the foreseeable future. Historically low interest rates, a robust economy, and strong employment numbers are boosting a surge in CRE demand across the country.  People might assume that all commercial real estate lenders are alike, but there are many types of financial institutions that work with CRE borrowers.

What is a non-bank lender and how is it different?

CRE loans have typically been funded by traditional lenders, such as banks, CMBS lenders, Fannie Mae, Freddie Mac, and other sources. Today, another type of financial institution has grown in popularity: the non-bank lender (NBL). The implementation of financial regulations over the past few years, such as the Dodd-Frank Act and Basel III risk-capital rules, has made CRE lending less profitable for some traditional financial institutions.

As a result, many tend to focus only on larger, more substantial borrowers and the most lucrative commercial real estate projects.  For many small business owners, securing financing from a traditional financial institution can prove difficult. Commercial banks have traditionally had tight credit for small business owners because they view them as risky investments.

Smaller CRE borrowers and owners are forced to look elsewhere for capital.

NBLs have stepped in to fill the funding gap in the CRE market and provide capital to borrowers who are not as well-served by traditional funding sources.

NBLs are essential to the commercial real estate mortgage landscape

Why should the borrower who wants to conclude a deal in a timely manner choose a non-bank lender? Because an NBL offers significant differences from your traditional financial institutions.

NBLs offer some banking services, but with a chief difference: an NBL does not take deposits from its customers or the public.

• Traditional financial institutions must follow standardized procedures for loan approvals that take time to work through.

While still adherent to standards and best practices, NBLs can offer flexibility to better suit borrowers’ needs for faster, more efficient loan approval. These lenders also offer borrowers a greater level transparency.

• Traditional financial institutions might provide other services besides affordable loans. They view borrowers as potential customers for deposit accounts and the full range of business services for all financial transactions. 

An NBL is transactional, focusing on lending, not on promoting additional services. Borrowers are not expected to develop a more comprehensive banking relationship, and have no need for moving deposits, merchant services, credit processing, and other products. Many real estate owners prefer a more streamlined process, and to devote fewer people to dealing with a lender. A non-bank lender like Liberty SBF makes loans directly from its balance sheet.

• Traditional financial institutions tend to lend to projects in established, major markets by well-known entities with long track records.

NBLs are more friendly to projects by smaller borrowers that fall outside of these strict parameters. Liberty SBF will work to ensure that borrowers feel comfortable and understand the loan process, and help drive the CRE deal to conclusion.

Traditional financial institutions, with standardized procedures for lending, are more likely to treat every borrower business the same way.

NBLs like Liberty SBF are specialists. We can better guide borrowers through the specific requirements of the SBA 504 loan process.  We review each business in the context of its industry to underwrite them appropriately.

• Borrowers value non-bank lenders for their ability to make decisions quickly with a minimum of red tape.

Borrowers have the opportunity to talk about a loan directly with a decision-maker and get a good idea of whether or not the loan is likely to be approved without going through a lengthy process. NBLs like Liberty SBF have senior executives in major markets nationwide who can meet locally with borrowers and further streamline the loan process. For all of these reasons, NBLs are predicted to grab a bigger piece of the CRE lending market in the future, with ample investor capital available to fund non-bank loans.

How to Obtain a Non-Bank Commercial Real Estate Loan

The decline in funding from conventional commercial banks has left many small business owners in need of financing. When such a business looks for a loan, it’s a good idea to look for the best non-bank lenders, whose leaders have years of experience of economic ups and downs in the commercial real estate sector and a thorough understanding of loan procedures. Qualifying for non-bank financing is as rigorous as qualifying for traditional financing.

A commercial real estate borrower should consider the following:

Identify the reason for seeking a loan: will it be used for a property acquisition, a refinancing, a building upgrade, or other use?

Consider what kind of financing is appropriate for the project.

Identify the right NBL with expertise with your specific deal and who is experienced, highly responsive, and efficient to apply for a loan.

Loan seekers and their brokers will have the best chance of success when they carefully present their project to the right lender. If they have done their homework and identified the best funding source, a single presentation may be all that’s needed.

Is an SBA 504 Loan Right for Your Business?

SBA loans are like traditional term loans with greater benefits and they’re partly guaranteed by the US government. An SBA 504 loan minimizes risk for commercial lenders, and gives creditworthy business owners (with sufficient liquidity and net worth to be acceptable to the lender) access to better financing than they would otherwise qualify for in a conventional loan.

You can find Liberty SBF’s requirements for SBA 504 loans here.

The experts at Liberty SBF specialize in helping guide borrowers though the loan process efficiently to ensure their successful SBA 504 loan closing. Now is the time to lock in a fixed-rate commercial property loan while interest rates are still low. Contact Liberty SBF, and we can get the job done in 45 days or less.


Contact Liberty SBF today. Email info@i.libertysbf.com or call (213) 297-5747.

You can also connect with Liberty SBF on LinkedIn


RECOMMENDED ARTICLES

Protect Your Bottom Line – Refinancing to a Fixed-Rate CRE Loan

Loan Interest Rates for Dummies (and the Rest of Us)