In commercial real estate, borrowers have two main paths to secure financing: going directly to lenders or working with a commercial mortgage broker. While some transactions are simple enough to be handled one-on-one with a bank or lender, many real estate investors and developers choose to work with brokers for various strategic reasons.
Below, we break down some of those.
Why Borrowers Use Commercial Real Estate Brokers
Broader Access to Capital
Brokers maintain relationships with a wide range of capital sources, including banks, life insurance companies, CMBS lenders, debt funds, private lenders, government-sponsored entities like Fannie Mae and Freddie Mac, and many more. I95 Capital also maintains relationships with private equity firms and family offices. Instead of approaching a single lender, borrowers working with brokers can access dozens, often hundreds, of financing options through a single point of contact.
Competitive Terms
By running a competitive process among lenders, brokers can often secure lower rates, better leverage, longer interest-only periods, or more flexible structures. This competitive tension helps borrowers get financing that better matches their goals.
Help with Complex Deals
When a deal is nuanced, whether it’s a value-add property, construction loan, recapitalization, or an asset with a unique risk profile, an experienced broker can help position the opportunity in the best possible light. They understand how to structure, present, and negotiate deals with lenders specializing in specific scenarios.
Efficiency and Time Savings
Good brokers handle packaging, lender discussions, and term sheet negotiations. Some also handle some level of underwriting. Outsourcing these functions allows borrowers to stay focused on the real estate while the broker drives the financing process. This is especially useful in acquisition scenarios where timing is critical.
Market Insight
Since brokers are active in the lending market every day, they bring real-time insight into capital availability, pricing, and lender behavior. They know which lenders are tightening or loosening credit, who’s lending on specific asset types, and what terms are achievable.
When It Makes Sense to Use a Broker
Higher-Leverage or Bridge Loans
If a deal requires leverage above 65–70% LTV or includes a business plan with significant value creation, brokers are often needed to access non-bank debt funds or structured capital sources.
Niche or Transitional Assets
Assets in smaller markets or specialized sectors (like student housing, self-storage, or short-term rentals) may not fit within traditional bank lending boxes. Brokers help identify capital sources that understand those niches.
Recapitalizations and Cash-Out Refinances
When a borrower is looking to pull equity out of a property or restructure the existing capital stack, the complexity of the transaction often warrants a broker’s involvement.
Privacy and Process Control
Some borrowers prefer to keep their identity or intent confidential while shopping the deal. Brokers can conduct the search quietly and strategically.
Network
Investors without established, strong, and diversified lender relationships benefit from a broker’s established network and credibility.
When Going Direct May Be the Right Move
There are also scenarios where borrowers may benefit from working directly with a lender:
- The loan size is relatively small (typically under $2 million)
- The borrower has a long-standing relationship with a lender
- The asset is stabilized and generating strong cash flow
- Pricing and structure are simple.
Final Thoughts
Choosing whether to work with a broker or go direct depends on the specifics of the deal, the borrower’s goals, and the current capital markets environment. For many investors, brokers provide valuable expertise, access, and execution support, especially when the financing requires more than an off-the-shelf solution.
At i95 Capital, we specialize in navigating the capital markets on behalf of real estate investors and developers across the I-95 corridor. If you’re evaluating your financing options, contact us and we’ll help you determine the best approach.
