For newer brokers, it’s wise to recognize the limits and payoffs in commercial lending

As published in Scotsman Guide’s Commercial Edition, July 2008

The sea of potential new commercial brokers is as wide as it is deep. Some want to learn more about the industry. Others might have dipped a toe into the commercial waters and are considering moving into the business full-time.

If you fit into one of these groups, you would be well-advised to go in with your eyes open. Many beginning brokers do not know the nuances of commercial lending but must learn them to make informed decisions.

For the right candidates, commercial lending is a perfect fit with tremendous rewards. But for the wrong candidate, the risks, stress and commitment to customers might break the camel’s back.

Examining cautionary and positive aspects of being a commercial broker can help you understand the unique position you’re in—and help you understand how to proceed.

Challenges

The news about salaries in commercial lending is that, for the most part, there are none. Often, commercial lending is a straight-commission industry, where there are no draws and no benefits offered. It can be a radical life change for people unfamiliar with a commission structure.

It’s common for beginning commercial brokers not to bring home one dime in the first two to three months on the job. It’s generally recommended that people who can stomach the uncertainty of the commission structure should wait to enter the business until they have built a 60- to 90-day war chest to cover their personal financial obligations. By doing so, they can ensure that their personal or family situations are not adversely affected in the time it takes to learn the business and to build a solid lead base.

A good number of commercial brokers also work as independent contractors. For the most part, commercial brokers set their own schedules and take on only the business that they want.

While this offers tremendous flexibility, managing your own time can be a pitfall for the wrong candidate. There is a tremendous amount of self-discipline required to be your own boss.

Just because no one tells you when to be at work or how many hours to be there doesn’t mean that you don’t have to do anything. Remember, you are likely not pulling down a salary. Simply filling your seat will not pay the bills. Most commercial brokers are in a position where they must find the discipline to uncover leads, work them, create relationships with investment-banking firms and maintain stellar customer service for clients.

These added responsibilities can be stressful. Commercial lending is a 24-7 job that includes demanding clients who expect you to be available to them all the time, at any time. It can affect your home life, with frequent interruptions outside of regular working hours. Financial dealings also are emotional, particularly for the borrower, which often adds to brokers’ stress.

To succeed in this business, you have to have a thick skin. You must enjoy the work enough to offer additional help to clients who become upset with you.
Although it’s tempting to play tough, realize your clients ultimately are paying your bills. It would be wise to treat them well and to work hard for them.

The plus side

It’s always wise to balance the challenges facing commercial brokers with the positive aspects of the job.

The biggest upside of commercial lending is in the financial rewards that a good broker can generate. The commercial lending industry is not like the residential side, with its pronounced dips and peaks. Even as the housing market slipped, commercial lending continued in relative stability—meaning that the vine is still ripe for the picking with deals that need funding. Brokers who have the right business acumen, the right contacts and solid investment-banking partners can create a significant revenue stream.

Another advantage is that for the most part, being a commercial mortgage broker does not require a license, specific education or particular work history. Granted, many commercial brokers do have advanced degrees, well-regarded résumés and years of experience. But many others have taken advantage of the fact that a nose for the business, strong sales tactics, people skills and a stellar work ethic can be building blocks for a successful career with commercial loans.

While other positions in the commercial lending industry might require a particular formal education—an underwriting or analyst position, perhaps—a broker’s personality, passion for the industry and keen ability to look for good business deals can lead to industry success.

It’s important to note, however, that even though brokers might enter the field without a specific education, new market entrants should look for opportunities for on-the-job training.

As a new or questioning commercial broker, it’s wise to know what type of business lifestyle you desire before you get into commercial lending full-time. Successful commercial brokers can make a tremendous living while enjoying a flexibility other occupations can’t provide. But they have to understand that stress, demanding clients and a lack of a stable paycheck often are part of the bargain.

Either way, take the time to know the business and to know yourself before you make the leap.

Andrew Bogdanoff has more than 35 years’ commercial lending experience and founded Remington Financial Group in 1993. Bogdanoff has served as the company’s president since its inception, and, under his leadership, Remington has closed billions of dollars in transactions. Andy can be reached at andy@remingtonfg.com. For more information on Remington Financial Group, please visit www.Remingtonfg.com