A mortgage broker will typically charge one- to three-percent fees for successfully arranging a commercial real estate loan for your gas station. With conventional loans typically averaging about $1 million, these fees can run from $10,000 to $30,000. The lending bank will also charge a loan origination fee, so now we’re talking about serious money. SBA loans are even more expensive.
According to the National Association of Convenience Stores (NACS), 62 percent of all gas stations in the U.S. are owned by single-site operators (see the NACS factsheet). If you only own one gas station, getting a million-dollar mortgage is not something you do every day, and can seem to be a daunting task. The urge to seek professional help is understandable.
A good broker can help you organize your documents, analyze the data and anticipate questions from the lender about potential weak spots in your business, and they will shop the loan with numerous lenders for the best deal. But how do you know if you’re talking to a successful broker?
Ask for a list of successful deals. You should focus on deals done after mid-2008 – when the credit meltdown started. Anybody could get a deal funded in 2007, regardless of their ability. If the broker successfully closed a deal during the first quarter of 2009, he’s probably a pretty good broker with strong contacts in the financial world.
Ask to see a ‘loan-package’ for a previous deal. Successful brokers will create binders with tabs for each document group. Judge it for organization, clarity of writing, and completeness (see our recent entries on Looking for financing? Wondering what lenders look for? and Financing your gas station in today’s tough market.) Also, ask to see a list of the bank quotes received for each deal. This will tell if they actually shopped the deal, or took the first offer available.
If you elect to use a broker, here’s some advice:
Beware of non-refundable fees paid up front. Up-front fees should be minimal – just enough to cover their expenses in preparing a package and shopping it to their list of financial contacts.
Have your attorney review any contract the broker wants to sign. Items to think carefully about include a request for exclusivity and for how long, confidentiality of your documents, fee structures, and refunds for non-performance. You may want to limit the broker’s ability to shop your deal through other brokers, as this may mean your confidential data will be spread all over the internet.
Know what a broker can and can’t do for you. A broker cannot give you a guaranteed commitment for funding. This can only come from the finance company, and will be addressed in writing from them to you. Neither can a broker do everything for you. The lender will want to talk to you. Especially in today’s tough credit environment, lenders will want to get a sense of how well you understand your business. They will probably visit your site to observe its quality first-hand.
Having read this, you might ask if you really need a broker. The answer depends on how much you think your time is worth, your ability to present your business (in the way we’ve described in other posts), and in your ability to find a lender that will work with you. Keep in mind that regardless of today’s market conditions, lenders will want your business if you’re a good operator, and will work with you in much the same way a broker will.
Author: Kevin Morley
February 19th, 2009 at 4:42 pm
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