Match the Size of Your Commercial Real Estate Lender To the Size to Your Commercial Real Estate Loan
A common mistake by many commercial real estate borrowers is to apply to the wrong-sized bank. They will apply to banks like Citibank or JP Morgan Chase - giant, multi-billion dollar banks - for a tiny $300,000 commercial real estate loan.
Those giant banks really don't want to mess with such tiny loans. They have billions of dollars to lend. They greatly prefer commercial real estate loans over $2 million. The tiny loan could easily linger for months in some dusty corner of the loan officer's desk, as the loan officer directs his attention towards the larger, more interesting deals on his desk..
Commercial real estate borrowers often make the opposite mistake as well. They'll take a pretty good $5 million commercial real estate loan to a little-bitty $200 million bank. The deal could be fine, but because the loan is so large in comparison to the capital of the bank, Loan Committee will often hem and haw for weeks, delaying any decision and constantly asking for more documents. The small bank may eventually approve the loan, but the poor borrower will first have to walk through hell.
The wise commercial borrower will therefore take his commercial real estate loans to the right-sized bank. Small commercial real estate loans should go to small banks. Large commercial real estate loans should go to the big money center banks. Medium-sized commercial real estate loans should go to a regional bank with a branch nearby.
Match the size of your commercial real estate lender to the size of the commercial real estate loan that you need.
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