2. 888-578-5441 x81 Phone www.CSHigdonInc.com
888-578-5441 Fax
Hello,
Financing commercial property is a major event in any investor’s or small
business person’s life – especially if it is his or her first time through the process. As
your client’s broker you are sometimes faced with an untenable situation due to
circumstances beyond your control:
Your client has “special financing circumstances.”
This is a euphemism for clients who wish to purchase commercial property
who may not have the perfect financial profile for their existing banking relationship.
Any number of reasons for this situation come to mind: The client has reached his
loan limit with his bank, recent credit problems make him a bad risk for more debt, the
lender doesn’t “do” the kind of loan he is seeking, the collateral is not acceptable, the
client has a limited amount of capital, etc. In the past, when you ran into this
situation, you ran the risk of losing the deal … until now.
How We Can Help You
My name is Craig Higdon and my firm, C. S. Higdon, Inc., specializes in helping
small business owners, real estate investors, and their advisors identify the most effective
methods to finance income producing properties. We also get paid the same way that you
do: Upon the successful close of the loan. If we can not get your client a loan, they will
not owe us anything.
And the best part for you is that we specialize in helping the commercial broker
close transactions. The only thing we do is real estate lending.
We are a direct lender that specializes in commercial financing. As direct lenders,
we offer programs suited to small business owners seeking commercial property for their
business needs. We counsel them to consider commercial real estate as a way to provide
income and wealth enhancement outside of the business. We also provide a wide array of
financing to commercial real estate investors who desire more flexible terms than those
found in CMBS loans, assuming you can find any of those today. There is a very good
chance that we will help your client find a flexible financing program to meet his or her
needs.
How Do We Do This?
I have over 23 years of experience helping hundreds of commercial real estate
investors like your clients. Because we are correspondents for several national lenders,
we are not locked in or committed to offering your clients a single set of interest rates or
loan programs. However, as direct lenders, we have more control over the lending
process and can “bend the rules” when the transaction makes sense.
3. 888-578-5441 x81 Phone www.CSHigdonInc.com
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We are able to take your client’s financing request sort through several offerings
in order to find him the best possible program for his situation.
With this range of available financing, we can provide your clients with a tailor-
made loan program designed to help them meet their investment goals. Whether they are
involved in development, buy-and-hold investment, value-added rehabilitation and re-
tenanting, are part of a home owners association or cooperative, or small business
expansion, we are aware of programs to serve their needs.
All of which can help you when your client has special needs.
I Would Like to Extend an Offer …
As the principal of the firm, I would like to “buy” any of your small business and
commercial real estate investor clients who are in the market to purchase a commercial
property a half hour of one of our associates’ time to discuss any specific project that may
be of interest to them. At the end of our half hour, we will provide a plan to help them
effectively structure and obtain their financing, whether through us or on their own.
You see, we understand that we are dealing with their livelihood, and more
importantly, a highly prized possession - their real estate. Thus, we want our relationship
to be a long and enduring one, not just a simple half-hour session.
If you are interested in taking me up on this special offer, please see the
information at the end of the report on how to take the next step. We look forward to
working with you on this and future transactions.
Sincerely,
Craig S. Higdon
Director
C. S. Higdon, Inc.
5. 888-578-5441 x81 Phone www.CSHigdonInc.com
888-578-5441 Fax
A Special Report Intended
For
Commercial Brokers
By
Craig S. Higdon, BSME, MBA
“The Commercial Broker’s
Transaction Closing Secrets”
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The Commercial Broker’s
“Transaction Closing Secrets”
As a commercial broker, you work extremely hard to open up purchase transactions and
get them to close. In most cases, your client will need some financing assistance to get to
closure. As you proceed with your purchase, you usually hear something like this:
“I need help with my financing.”
A simple enough sentence, but it is one that can have serious implications to your deal. It
is also a sentence that you may hear all too frequently from clients with “special” needs.
Why would your commercial clients have special financing needs? Well, to cover a few
possibilities: The loan request might be too large or too small for his bank, the client
might be at his loan limit, his credit file had too many recent derogatory items, the
property type may not qualify, the client wants to preserve capital for his business by
minimizing his down payment … the potential “special” list is long … and it is not your
fault!
So how do you keep your client and his transaction on track?
By referring him or her to an experienced commercial financing firm that offers more
flexible financing options than the big conduits. A firm that can provide your client with
excellent real estate financing regardless of their “special” needs.
That is where we come in: C. S. Higdon, Inc. We are experts at closing commercial real
estate transactions: Both owner-user and investor buyers, “vanilla” buildings (office,
retail, multifamily, warehouse, etc.) and special purpose (hospitality, automotive,
medical, etc.), low down payment, reduced documentation, and “challenged” credit.
More important to your client, however, is that our financing can be structured to allow
period pre-payments and potentially no pre-payment penalties at all. We also require
fewer third party reports and can close loans faster than the Wall Street firms. If you
have ever had a client get “stuck” in a Commercial Mortgage Backed Security (CMBS)
loan, then you know what kind of advantages we can offer your client, not to mention
help in preserving your reputation.
Getting back to the concept of “closing” the commercial transactions that you have
worked so hard to open, we have listed a number of likely situations in which you
might have a transaction where we believe that we can be of real service in helping to
close it.
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TYPICAL “TOUGH” CLOSING SITUATIONS
Changes in Market Conditions
Changes in Borrower Credit
“Challenged” Income Documentation
Changes in the Construction Budget
Taking Out Construction or Interim Financing (Permanent Loans)
So let’s take them one by one and see how C. S. Higdon, Inc. can help you with your
existing customers so that you can close their transactions.
Changes in Market Conditions
This is one that always seems to catch us by surprise even though in hindsight, we all
thought we could have seen it coming. The most obvious example of this is the Sub-
Prime meltdown of 2007 and its effects on the credit markets. Underwriting criteria
tightened, more loan applications were turned down, and borrowers in the middle of long
term projects found themselves without financing.
As commercial financing specialists, we work with multiple investors in different
geographical areas. These investors have different loan appetites at different times.
When some are out of the market, others are seeing opportunities and moving
aggressively to fill the void. Even at the worst of times, there is usually still someone out
there financing almost all types of transactions.
It is our job to either know or to be able to find out who is.
So when market conditions change and you have a construction, bridge, or permanent
loan application you cannot fund, we may just have the loan program to save the day.
Changes in Borrower Credit
This is a situation that can happen quite unexpectedly and can actually be none of the
fault of the borrower. Two words: Identity Theft. Unfortunately, the burden is still on
the borrower to prove that all of those late payments for that Mercedes he does not own
are not his derogatory marks!
Let us also throw in medical issues and the problems that people face with medical
billing and insurance payments. Another issue to be concerned with is Credit Scoring
and how all of the different variables go into establishing a score. Frequently, you can
have a borrower with great payment histories, yet they have low scores because of credit
utilization, amount of credit extended, or recent credit extended.
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Finally, there is the ultimate in credit profile busting: Cash flow problems. Yes,
sometimes borrowers are actually late on their payments and are looking to reduce cash
outlays. Unfortunately, your seller needs a certain amount of money for his property and
may not be in a charitable mood to help your buyer!
Again, this is an area where we can be of real assistance. We can sometimes look past a
credit profile to the underlying property and its ability to service debt. This can apply to
both income producing and non-producing (land or vacant collateral) properties.
“Challenged” Income Documentation
This situation could mean a couple of things. In the best case, it is where the buyer’s
recent year’s cash flow may be insufficient to allow him to show sufficient debt coverage
for the property he wants to purchase for his business. This could be part of an overall
pattern for the borrower, as some real estate developers generate huge cash flow one year
and none the next as they reinvest their proceeds. It could also be a situation where
several key tenants left other projects or business income slowed as part of the normal
business cycle.
In the worst case, you may have a borrower who has not filed tax returns on time.
In either case, there is a class of investor who approach commercial loan underwriting by
focusing solely on the subject property’s cash flow and will not require borrower income
documentation! This is similar to residential “EZ Document” underwriting, but subtly
different. These types of investors are very helpful to your clients who, for whatever
reason, do not have all of their income documentation together.
As well connected commercial real estate financiers we usually have a few of these types
of investors in the Rolodex for these tough-to-finance situations. And once again, a
transaction can be saved.
Changes in Construction Budgets
This is a construction lender’s nightmare. Your client has a project that is going along
happily … draws are being made, vendors are getting paid, and then it happens.
Something in the plans did not work out correctly, the city building inspector says that
something is not up to current building codes, the developer makes a last minute design
change to accommodate a tenant, or whatever. In each case, the client calls you with a
“help, I need a new lender” request when the existing lender can not change the loan
amount. And you are stuck because you do not have a lender that you can recommend.
Another version of this scenario is when your client comes to the end of the established
construction loan term and the project is not complete! Let us not forget that your client
still needs to move in the tenants, and before he can do that he needs to finish the Tenant
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Improvements. And he can’t pay you for those leases, either. Now you need to find him
more money and more time.
So you are faced with finding another lender that can refinance an existing construction
loan or provide a bridge loan to complete construction and allow for lease-up. Have no
fear! We have construction investors willing to step into an existing transaction,
provided the fundamentals still make sense.
Retiring (Taking Out) Construction or Bridge Loans
For your clients who may have used smaller lenders, the permanent loan can often be a
problem. The small lender’s loan portfolio may not be geared towards permanent
financing and you may not have the relationships that would allow you to help your client
quickly get that short term loan paid off.
Also, if any of the previous hazards mentioned strike your borrower between his short
term loan and its payoff date, you may find yourself trying to quickly find a lender to
keep a good loan from going bad and affecting your client’s ability to do more
transactions in the future!
What is the solution that saves the client and his ability to do more deals with you? A
referral to a well connected and experienced commercial lender. Permanent loans can
come from a number of sources, such as mortgage banks, Wall Street conduits and
insurance companies.
Transaction Closing Services In Review
Some of the areas in which C. S. Higdon, Inc. can be of service to you in closing your
transactions and maintaining your client relationships:
Bridge Loans: Equity, cash-flow, and repositioning oriented short term
loans to get your client to the next step.
Credit Challenged Borrowers: When the client’s credit profile no longer
meets minimum bank criteria, we have programs that can bend the rules.
Stated-income commercial loans: When certain aspects of the credit file
would not work in “standard” underwriting situations.
Permanent loans: For owner-user, single tenant, and multi-tenant
commercial investment property, as take-outs or refinances.
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OTHER AREAS WHERE WE CAN HELP
Hospitality: Not many lenders will get involved in hospitality lending, so I wanted to
make you aware of our ability to help clients who might be seeking to build, purchase, or
refinance this type of property. We prefer national or regional “flags,” but we can also
help experienced independent and B&B operators.
Special Purpose Properties: If you have clients who own real estate related to a specific
business activity or “mixed use” we have a home for that loan.
Land: If you have a client seeking to develop raw or improved land, we have investors
who can help with the acquisition and entitlement process.
IN CONCLUSION
You are going to face situations where you will have clients with special financing needs
due to any number of potential challenges to their loan application … there are simply
too many things that can affect their “file.” But now you have an effective tool to turn
that “no” into a “yes” by utilizing the experts at C. S. Higdon, Inc.
Call us the moment you think you have a transaction with a special challenge, and
borrower who needs flexibility, or if you simply want an expert to help you close your
transaction.
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What to do Next
It has been my experience that the complexity of the commercial loan process requires a
different approach to helping my clients evaluate their financing options. When I started
out doing commercial and construction loans, the extent of my service was limited to
calling a few local lenders to see what the best rate of the day was.
As I got better at what I do, I grew with my clients. I also adapted to their changing
needs. Now, I fully analyze a client’s portfolio, investment goals, and risk/reward profile
before making financing structure recommendations.
This growth process has taught me that I have to coordinate a number of professionals in
other disciplines to move a loan transaction to a favorable conclusion. I have to help you
to help them! Only in this manner can I truly benefit our clients, earn their trust, earn
your trust, and provide valuable advice for transaction after transaction.
But first, I would like to meet with you. Coffee, lunch, ice cream, whatever. Let’s spend
a few minutes getting to know each other and the scope of our practices. Once we’ve
done that, then we can move towards helping people with their commercial real estate
loan needs. Please call me at 888-578-5441 x81 and let’s get together.
I have also developed a “15 Minute Commercial Loan Review” which I conduct over the
telephone with your clients interested in commercial and construction loans. Here is
what I accomplish in this fast-paced, no-nonsense session:
Investigate The Transaction - The key to a successful commercial real estate
finance transaction is to understand all of the issues that affect the property and
the guarantors. Missing a key item can set the process back weeks as we try to
convince the current lender to move forward or start over with a new one. This
will help your client uncover hidden road blocks to their loan closing.
Evaluate Financing Alternatives - There is more than one way to get to the top
of the mountain, but not all of them are easy or short! There are nearly as many
ways to finance a commercial property and without someone showing your client
the way, getting your loan funded can be an arduous experience.
Recommend Financing Structures - At the end of the interview, I will have
narrowed the choices down to one or two ways that will get your client the
financing he or she needs for the project. With my recommendations you will be
able to quickly and effectively package your loan request for almost any
appropriate lender.
This consultation can take place at your client’s convenience. To secure a time for the
consultation, please call me at 888-578-5441 x81 or send an email to
Craig@CSHigdonInc.com. Thanks!
Craig Higdon
12. 888-578-5441 x81 Phone www.CSHigdonInc.com
888-578-5441 Fax
About the Author
Craig Higdon
Director
C. S. Higdon, Inc.
Craig S. Higdon graduated with a Bachelor's degree in Mechanical
Engineering from the University of Southern California. He
subsequently earned a Masters in Business Administration from
Heriot-Watt University in Edinburgh, Scotland. After leaving school,
he decided that he did not look good in a pocket-protector and
consequently took a job on Wall Street as a retail stock broker. This
began 30+ years of work in the financial services sector where he held
jobs as an investment banker, business owner, and eventually as a
mortgage broker.
Mr. Higdon has been in the mortgage business since 1993 and is a licensed Real Estate
Broker in the state of California. Mr. Higdon has extensive background in both
residential and commercial mortgage loan transactions, including significant construction
loan experience. His personal mission is to help small business owners and real estate
investors create wealth through the acquisition of commercial income producing
property. As a second degree black belt in Shaolin Kenpo, he considers it his personal
duty to protect real estate investors from commercial loan misinformation.
