Commercial Lender Dragging Feet on 10% Down Loan. Advice Needed!

8 Replies

Hello everyone! This is my first post.

I've flipped a couple SFHs over the past couple years, and right now I'm trying to purchase my first commercial property. I've done my homework on the property and know it's a good investment. However, I only have enough cash for 10% down. The listing agent said that financing shouldn't be a problem, and she gave me the number to a local commercial lender that she said had done numerous loans at 10% down.

I called the lender early last week and gave him the basic information and he said it shouldn't be a problem, but that he'd have to get preliminary approval first. At the end of last week, I contacted him again and he said to be patient and that he'd let me know next week. I contacted him yesterday morning and still haven't heard back. So I've spent two weeks and still know nothing.

I have not signed a purchase agreement yet, because I wanted to make sure that I could get a loan with 10% down. However, I've also spent several hundred dollars on inspections and a flood survey. So I want to lock down this deal ASAP.

So, my questions:

1.) Is it normal for a commercial lender to need over 2 weeks to get preliminary approval to do 10% down?
2.) The seller may be willing to seller-finance some of the down payment. However, the lender I've been dealing with said his bank would not allow such an arrangement. I've read about this strategy in numerous books, including Brandon's, so where do I find a lender willing to structure the loan this way?
3.) Even though I don't have preliminary approval for being able to finance at 10%, should I still sign a purchase agreement? Any recommendations on the contingencies?

Thank you!
David

Originally posted by @David Gore :

(a) I have not signed a purchase agreement yet, because I wanted to make sure that I could get a loan with 10% down. However, I've also spent several hundred dollars on inspections and a flood survey. So I want to lock down this deal ASAP.

So, my questions:

1.) Is it normal for a commercial lender to need over 2 weeks to get preliminary approval to do 10% down?
2.) The seller may be willing to seller-finance some of the down payment. However, the lender I've been dealing with said his bank would not allow such an arrangement. I've read about this strategy in numerous books, including Brandon's, so where do I find a lender willing to structure the loan this way?
3.) Even though I don't have preliminary approval for being able to finance at 10%, should I still sign a purchase agreement? Any recommendations on the contingencies?

Thank you!
David

 (a) That's not really how it works for commercial lenders. To give you the time of day, they want a fully ratified contract first. This is normal for commercial, no such thing as preapproval in the commercial world. Commercial dude honestly should have set your expectations a little better; or maybe he assumed that ratified contract was pending shortly and you BOTH should have set each other's expectations a little better.

(1) Without a fully ratified contract, you are super duper low on the commercial lender's priority list. Like, below his dry cleaning. Just how it is in commercial world. 

(2) Get a fully ratified contract, then pitch the commercial lender on it. AFTER you have that ratified contract. It appears you've used up your "looky loo with no ratified contract" time allotment with this commercial lender. We have MUCH longer time allotments for that on the residential side.

(3) I think my recommendation should be clear at this point. :) Sign that thing, and watch him suddenly activate as you move from the bottom to the tippy top of his priorities list. 

Good luck. 

Thanks Chris!

I was just trying to be courteous to the seller by not going under contract unless I knew for certain the financing would come through with 10% down. It seems from reading on here that most lenders want at least 20% down, thus my concern.

I'll go forward with signing the contract, contingent on financing at 10% down. If anyone else has further advice or recommendations, I'm all ears.

Thanks again,
David

Got ahold of the lender moments ago. He said the guy working the spread was out of the office yesterday and today. He said he would know a definite on Monday or Tuesday at the latest.

I asked him if it would help increase the priority if I were to go ahead and sign the purchase agreement. He told me it wouldn't change anything on his end.

So, I'll give him till Tuesday and see what happens.

- David

I was not able to find a lender willing to work with me on the deal. However, I was able to purchase the property with only 10% down by convincing the seller to do owner financing for a short term. Never give up on a good deal. There’s always a way!

I’ve renovated the property, have it fully leased out, and it is cash flowing extremely well. I’m already under contract now on a second commercial property.

Best of luck!

David