Retaining customers through quality referrals to non-traditional lendersBrett Evensonreferrals, underwriting, commercial mortgage loans
In the conservative, risk-averse world of commercial mortgage
lending, bank loan professionals are often forced to say no to
quality customers when loan requests fall outside the bank's
lending parameters. Every seasoned bank loan officer can regale you
with a myriad of stories about customers who, despite having
significant investment or deposit accounts at their bank, failed to
qualify for a commercial mortgage. The reality is that all bank
loan officers have experienced the frustration of disappointing a
customer or potential customer because of:
- Inadequate debt coverage ratio;
- Non-qualifying property type;
- A loan amount that's too small;
- Borrower lending limits;
- Inability to document income;
- A large cash-out refinance request;
- A property outside of the geographic footprint; and
- Low credit scores.
While each institution's "box" may be quite different, the
universal fact remains that the rigorous underwriting standards and
conservative credit culture of the banking industry results in
turning away significant quantities of commercial mortgage loan
requests. In fact, we estimate that banks reject well over 50
percent of all requests for commercial real estate loans, and that
figure does not include those initially screened out by a loan
officer before even taking an application. The problem for bank
relationship managers is that by saying no to a customer, they risk
losing that customer to a competing bank. Commercial borrowers are
then likely to move their deposits and other business lines to the
financial institution that can serve their borrowing needs. Forced
to grow business and retain existing customers, bank loan
professionals need better options for clients that don't meet the
bank's lending criteria. So what can a bank loan officer do to
better serve the borrowing needs of important clients? The solution
lies in having a reliable back-up option for referring loan
turndowns - one that will not compete for your deposits or other
banking business.
Instead of simply disappointing a customer with a rejection when
their loan request cannot be accommodated, a loan officer should
provide their customer with an alternative solution. Ideally, this
would take the form of a seamless referral in which the client
feels as though they aren't being rejected at all, but rather
introduced to a lending partner that will help them with their
loan. By taking charge and pointing a customer in the right
direction to solve their commercial mortgage needs, the loan
officer will earn valuable relationship capital with their
customer. Not surprisingly, the success of this strategy is reliant
upon the referral partner that a loan officer chooses. When
evaluating which alternative lenders offer the most, bankers should
be quite careful to assess the following criteria:
1. The partner should be a reliable and reputable lender. When a
banker refers a client, they must have the piece of mind to know
that their client will be well taken care of. The treatment the
client receives by the lending partner reflects back on the
referring loan officer. The lender should have loan terms and
features that appeal to the customer, along with a high level of
customer service. Also, the lender should be able to report back to
the referring loan officer on the status of customer referrals to
keep the loan officer in the loop.
2. The partner should have a broad lending "box." Loan officers
should have a high degree of confidence that their customer will be
approved by their partner, regardless of the reason for the initial
decline. The ideal companies can offer attractive financing
regardless of property type, credit and cash flow, and can provide
both investor and owner solutions.
3. The partner should not be a competitor for deposits, investment
accounts or other business. Simply put, the partner should not be a
competing bank. Seek out a firm that specializes in commercial
mortgage lending only.
Finding a lending partner that meets these criteria will provide
bank loan professionals with a way to say yes to customer loan
requests that do not qualify at their bank. The best strategy is
for loan officers to refer loans that do not meet their bank's
guidelines to a non-traditional lender. This allows banks to
further solidify the relationship with their client and prevent the
loss of business to a competitor.
Brett Evenson is managing director of Commercial Direct,
a division of Bayview
Financial Small Business Funding LLC. He may be reached at
(877) 265-9895 or e-mail
[email protected].
