How Brokers Can Use Pandemic Aid Referrals To Boost Commissions

With deal volume depressed, many commercial real estate brokers have seen their commissions dry up over the past year, especially those who work in hard-hit asset classes like hospitality, restaurants and retail. But federal aid programs offer brokers another way to earn commission: by referring their clients to aid lenders.

Direct lenders will pay brokers referral fees for identifying clients that are eligible for pandemic aid loans through the Paycheck Protection Program or the Small Business Administration’s 504 Loan Program. 

“There’s an opportunity for brokers to make up for some of the lost volume they’ve seen over the last year,” said Alexander Cohen, CEO of Liberty SBF, a direct lender for small businesses. “Brokers can simply look inside their own client base to earn referrals. It’s the midsize firms that need the most financial help that are the most likely sources of income.”

Liberty SBF pays out the same referral fee to brokers no matter the size of the loan, Cohen said, so brokers can earn significant commissions by searching their client bases — and even their professional broker networks — to find small businesses or independent contractors who could use funding to see them through the current crisis. 

PPP Loans

The Paycheck Protection Program claims it has helped protect millions of jobs by providing forgivable loans to small businesses so that they can keep employees on their payroll. However, there are still millions of eligible businesses that haven’t applied for PPP funding, Cohen said, including many that are likely within CRE brokers’ networks. 

While PPP loans for most businesses are limited to two-and-a-half times payroll expenses, restaurants, bars and hotels are eligible to receive three-and-a-half times payroll, and that extra income can be a critical lifeline to keep businesses running while the economy recovers. Cohen described how brokers can earn commissions for PPP referrals in two ways. 

First, brokers can simply connect their small-business clients to a direct approved lender like Liberty SBF. Liberty provides both first- and second-draw PPP loans, and brokers earn fees on any closed deals. 

Second, brokers can refer clients who have already taken out PPP loans to a direct lender that is buying PPP loans from other lenders. Liberty SBF has been seeing through the loan forgiveness process for borrowers who originally got the loan from another source.

“The forgiveness process is very intensive, and many of the smaller banks that provided these loans don’t want to take the process on,” Cohen said. “They might have their own struggles getting back into business themselves. We have a long history with the SBA and know how to handle this process.”

Many businesses that brokers may not have thought of are eligible for PPP loans, including building co-op boards, and even brokers’ friends from the industry: Many large brokerage firms employ their most successful brokers as independent contractors, making them eligible for pandemic aid. 

“The commission is the same on a $50K loan or a $5K loan,” Cohen said. “Even if a buddy who owns a restaurant needs a loan, we can help finance it.”

SBA 504 Loans

The Economic Aid Act passed in December set aside billions of dollars for Covid-19 relief, a portion of which has been authorized for use for the SBA 504 program, which provides low-cost financing for small businesses looking to expand their operations. As part of the aid package, Cohen said, the SBA has also agreed to subsidize the first six months of payments, including principal, interest and any associated fees for SBA borrowers. 

SBA 504 loans can offer rates up to 90% loan-to-value. Those terms provide extremely competitive capital for many real estate asset classes, like hospitality, self-storage, healthcare and assisted living facilities, that might otherwise have a hard time finding financing through the Department of Housing and Urban Development or commercial mortgage-backed securities. Liberty pays out commissions for referrals to secure these loans as well.

One massive category that is also eligible for 504 loans are owner-users of office and industrial space. Cohen said these midsized firms are often hard to reach in normal times and thus form a kind of untapped market for brokers to earn commissions. He said Liberty helped a Brooklyn warehouse owner secure a 504 loan to buy a larger facility in New Jersey through a 1031 exchange.

“In dense, urban markets, around 20% or 30% of the buildings are owner-user controlled,” Cohen said. “These loans are not what most brokers are thinking about when they’re trying to boost their commissions, but they are great arrows for them to have in their quivers.”

This article was produced in collaboration between Liberty SBF and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.