MARKET UPDATE BLOG
Small Balance Commercial Lending
September 20, 2018

The commercial real estate industry is split on the stance of small balance loans. Many mortgage bankers, lender, and brokers view small balance loans as inefficient to invest in, broker, and or place. On the other hand, there are those that use a workflow which streamlines the process of working with small balance loans, making them quite efficient.

With such a divide, we must ask the question, why small balance loans?

  • A lender can create greater diversification in their portfolio by placing a large number of small balance commercial loans, rather than fewer large loans.
  • A small balance lender often may achieve higher yields on an investment, as there is typically less competition for these loans.
  • Due to the fact that there are a greater number of small balance commercial loans in comparison to large balance loans, there are more transactions to be spread across different industry players.
  • Some lenders, mortgage brokers, and mortgage bankers have organized their shops to be efficient at placing small balance loans to take advantage of the greater number of opportunities in the lending arena.

To be an effective small balance lender or intermediary it comes down to a couple simple variables, organization and support. To be successful in the small balance commercial space you do not have time to waste. You need to be quick to underwrite, quote and process. If any part of the process breaks down, you lose profitability. Your staff must be able to manage the closing and post-closing/servicing process efficiently.

At Barry Slatt Mortgage, we are equipped to place loans of all sizes. We currently represent correspondent lenders that can make loans from $1-$100 million. For further information please call a representative in one of our 6 convenient office locations.