Commercial Financing, Banking Relationships, and One-Off Deals

Suppose a dentist-borrower inherits an in-fill parcel from his father's estate and seeks a commercial construction loan to build 12 spec houses.

A busy banker looking at this deal might say to himself, "This is a one-off deal.  If I make this guy a commercial construction loan, he'll probably never come back to me for another commercial construction loan.  I'm really busy right now.  I can't service everyone.  I think I'll take care of the Joe Builder, the local developer, instead because if I develop a banking relationship with Joe Builder, he'll come back to me year-after- year for new commercial construction loans."

By the way, an in-fill parcel is a parcel where all of the surrounding parcels have been developed into completed condo's, apartments, strip centers or whatever.  An in-fill parcel stands in contrast to a parcel located just outside of town where all of the surrounding parcels are still used for agriculture.

A spec project is one built on speculation with no pre-sales.  A spec house therefore would be a house being built  for immediate re-sale without a specific buyer in mind.  The developer is speculating that he can find a buyer before the interest payments on the empty house or the empty building eat him alive.

So what should a borrower on a one-off project do if all of the local banks are too busy to handle his deal?  One strategy might be to ask the bank for the name of the bank's favorite mortgage broker.  The borrower could take the project to the mortgage broker and have the mortgage broker bring the deal to the bank.  The mortgage broker is not a one-off client but rather a repeat source of business for the bank.  While the borrower will have to pay the mortgage broker a brokerage commission, at least the deal will get done.

You can find scores of hungry construction lenders who have the time to finance your deal right now by using C-Loans.com.