Leveraging Relationships with Local Lenders to Get Your Commercial Real Estate Funding to the Finish Line
When you’re seeking financing for a commercial real estate project, you need all the options you can get. You want the best terms, experience, and likelihood of making it through to closing and getting your project off the ground. In that search, you’ll conduct due diligence and speak with various lenders that specialize in your type of project.
After some time exploring the big-name national lenders, you may come to a point where you’re not satisfied with what’s presented. That’s when it’s time to turn to your community. After a few deals funded by local lenders, you might find it’s the ideal way to go.
Let’s look at why many commercial real estate borrowers partner with lenders right in their backyard.
1. Why local lenders are motivated to win your business
Before we dig into the benefits of building relationships with local lenders, let’s see why they might give you preferential treatment.
Local financing institutions are built on referral business. They don’t have million-dollar marketing budgets and institutional clients lining up for their services — they have to work for it. Local banks will go the extra mile to ensure you walk away touting the fantastic experience and deal you got with them. They know word gets around.
Further, every transaction and project is a significant public relations opportunity for a local lender. The funding of your project is likely to get written up in the weekly deal round-up by the local business journal, and they may get signage where the project involves new construction.
And aside from business pragmatics, the people behind the desk are your neighbors. Local lenders’ staff are members of your community and have a vested interest in putting money into it to drive economic growth and prosperity for all stakeholders.
2. Credibility and trust
Working with a local lender allows you to get face-to-face, build rapport, and establish trust — things more challenging in dealing with originators and underwriters thousands of miles away.
As is true in all facets, business is built on relationships. Originators that know, like, and trust you are far more likely to consider working with you and make it a worthwhile experience. When you earn the trust and buy-in of a local lender, it also enhances your credibility.
If the other party to your transaction knows your lender, your chances of getting a signed agreement improve significantly. There’s also a good chance that they or their associates have done business with your lender and know from experience that borrowers working with them are equipped to perform.
3. Experience and results
Yes, there’s some potential that you can get lower fees and rates, but the real value in going local is the experience and results — getting funded on time and the project approved.
Local lenders are generally more customer-oriented, attentive, and reliable. They know what’s on the line, and they care about you, the community, and how a positive outcome will support their values.
When you need to get them on the phone to answer a question, particularly by a point of contact you’ve built a relationship with, they’ll be there for you and may not be as strict about communicating with you after hours or on the weekend. And since they’re in your timezone, you’ll have one less logistical barrier to deal with.
Your local lender isn’t doing massive origination volume like national institutions and has more time and resources to devote to your transaction. Most local banks and private lenders are powered by small, cohesive teams, so you’ll experience efficiency created by better internal communication and collaborative processes.
When hitches inevitably arise, they’re more attentive to resolving issues during the underwriting process. Many local originators personally attend closings to immediately address any matter that comes up and support both parties.
4. An ear to the ground
Finally, your local lender has an edge on out-of-area competition in regional market insights and connections. Your local originator knows your market and better understands the demand for commercial and residential properties, property values, and other fundamentals.
Where a national lender might not be familiar with, care about, or believe in your community’s potential, your local lender does. On that aspect alone, your odds of getting underwritten significantly improve.
On the relationship side, your local lender has strong connections with trusted local appraisers who know your market and how property features, improvements, and conditions uniquely influence value. A national lender is very likely to enlist a less knowledgeable appraiser from the fringe of your area through an appraisal management company that pays low fees and contracts less experienced valuation professionals.
Additionally, your regional lender has relationships with area building and zoning authorities and can give a gentle push to keep approvals on track.
Finding your long-term finance partner
Whether you go with a local or national lender, evaluate which organization will be the best long-term finance partner in achieving your investment goals. Once you’ve found your dream-team lender, you’ll turn to them time and again to ensure you close on time, get a favorable deal, and have a remarkable financing experience along the way.