The foundation for these relationships is built on a broker referring deals to respective lenders. The lender finances the deal, and the broker is rewarded financially for their referral. While seemingly straightforward, there are several missteps that brokers can make in partnerships with lenders that can stunt their business.
The good news is that these can be easily navigated simply by doing some due diligence regarding client needs and lender offerings. Doing this leg work upfront can keep brokers ahead of the game and ensure an overall smoother process when referring deals, therefore leading to faster loan closings and business growth.
Understanding program offerings
The private lending space is still a relatively new source of funding, and it continues to expand and get more innovative as time goes on. While a lot of lenders will offer programs that are similar on the surface, often there can be more intricate details that differentiate each program. Since investment deals fall under the realm of commercial lending, guidelines and terms are more flexible and can change quickly as the market moves.
Therefore, lenders are always going to want their broker base to have the most up-to-date information and make sure they are aware of any adjustments to their programs. Still, that doesn’t mean relying solely on the lender to reach out regarding any changes. Staying ahead of the curve by having a beat on the current market conditions and what methods investors are utilizing are profoundly important to a broker’s business when it comes to providing value to clients.
Establishing relationships with an assortment of private lenders is a proven way to access expert knowledge. It is also critical to know what each lender specializes in. As the private lending space continues to evolve, lenders tend to focus primarily on a specific niche when it comes to their program offerings. Some lenders focus on residential investment properties, while others lean more towards true commercial buildings like office spaces and retail stores. In addition, there are lenders that specialize in financing single-family housing as well as those who focus mainly on larger multi-unit properties.