Commercial Loans Blog

Is Your Borrower ELIGIBLE To Get a Commercial Loan From a Credit Union?

Posted by George Blackburne on Thu, Apr 26, 2012

I have been blogging recently about how credit unions are emerging as an excellent source for commercial loans. However, not every borrower is eligible for a loan from a credit union.

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In the past, you had to work for a company (for example: Lockheed) that had a credit union.  Then the laws changed to allow a lot more people to join credit unions.  Nowadays, if you live in the same community as a community credit union, you can join the credit union and hence be a borrower.

Today we made a fascinating discovery.  We were working on a commercial loan for a dentist who owned a commercial building in Florida that was leased out.  But the dentist lived in California.

We submitted the deal to a Florida credit union located close to the property.  When we asked if this California resident could join and borrow from a Florida credit union, the loan officer replied, "Yes!"  Apparently just owning a commercial property in close proximity to a community credit union gives the borrower enough ties with the community to join the credit union, even if the borrower lives 2,000 miles away!  I was floored by this news.

Earlier in this article I wrote that "not everyone is eligble to borrow from a credit union."  That may not be true! 

So where can you find credit unions hungry for small commercial real estate loans.  C-Loans.com is an excellent place to start.  Dozens of credit unions have recently joined C-Loans in search of good small business loans.  You can submit your commercial loan to 750 different banks, credit unions, conduits, life companies and private commercial lenders in just four minutes using the C-Loans Commercial Mortgage Portal.  And C-Loans is free!

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Topics: credit union eligibility

Need a Commercial Loan? Don't Forget About Credit Unions!

Posted by George Blackburne on Thu, Apr 12, 2012

Credit unions are emerging as a very good source for small commercial loans.  As short as seven years ago, credit unions made less than 1% of all new commercial real estate loans in the country. 

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The Credit Union National Association now estimates that its member institutions hold almost 6 percent of small business loans in the U.S., totaling $40 billion.  That is an enormous increase in such a short period of time.   Credit unions are actively filling the void left when commercial banks across the country sharply cut back their volume of new commercial real estate loans.

Credit unions are planning an even larger foray into small business lending.  Lending by credit unions to businesses is currently limited by law to 12.5 percent of total assets, a substantially more restrictive limit than that imposed upon commercial banks.  Legislation is pending in Congress to expand the limit to 27.5 percent of assets.

Credit unions offer lower rates for small commercial real estate loans than commercial banks.  The reason why is because credit unions are exempt from Federal taxation.

Credit unions will also lend more dollars.  We got a quote from a credit union today of 80% loan-to-value.  Eighty percent!!

So where can you find credit unions hungry for small commercial real estate loans.  C-Loans.com is an excellent place to start.  Dozens of credit unions have recently joined C-Loans in search of good small business loans.  You can submit your commercial loan to 750 different banks, credit unions, conduits, life companies and private commercial lenders in just four minutes using the C-Loans Commercial Mortgage Portal.  And C-Loans is free!

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Another way to find hungry credit unions is to identify all of the credit unions located within a 30 mile radius of the subject property.  Credit unions are strictly local lenders, so you need to find nearby credit unions for your deal.

So how do you actually find these credit unions?  Simply go to maps.yahoo.com and type in the address of the subject property.  Then, in the "Find a Business" field, type in "banks".  All of the local banks and credit unions will appear plotted on the map.

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above.  Thanks so much.  :-)

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Topics: credit union commercial loans

Residential Realtors Are a Great Source for Commercial Loans

Posted by George Blackburne on Tue, Apr 10, 2012

The reason why residential real estate brokers are a great source for commercial loans is because they are NOT experts at commercial real estate finance.  They often need the help of a commercial mortgage broker to find a lender for their buyers.

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In contrast, commercial real estate brokers ("commercial brokers") are often near-experts at commercial mortgage finance.  Because all of the properties they sell are commercial in nature, they have their own personal stables of bankers and other direct commercial lenders that they use to finance their commercial property sales.

In addition, since they often sit in the same office together, its easy for them to just turn around and ask, "Hey, Steve, what bank do we know that is financing hotels today?"  Therefore these guys often don't need the help of a commercial mortgage broker.  They know this stuff as well as you and me.

There is another reason why I absolutely love residential real estate brokers as a source of commercial loans.  Residential real estate brokers are the guys who list the small commercial properties, like houses converted into small office buildings, small motels, and bread-and-butter mixed use properties, like a small retail shop on a busy strip with a triplex in the back.

And the thing about small commercial loans is that they close!  If your current pipeline is full $5 million and $10 million loans, especially if they are construction loans or international loans, there is a very good chance that every one of your deals will fall out.  Remember, it is the small commercial loans that actually close.

So why won't the big commercial brokers - companies like CB Richard Ellis, Cushman Wakefield, and Marcus & Millichap - list small commercial properties for sale?  They usually don't want to be bothered with properties valued at less than $2 million. 

This means that the owners of small commercial properties are often forced to list their properties for sale will small, mom-and-pop, residential brokerages.  That's wonderful news for us commercial mortgage brokers because the agents in these mom-and-pop shops actually need us. 

If you found this article to be instructive, I strongly encourage you to subscribe to our blog via email.  To get a copy of each new training blog article as it comes out, without having to remember to come back, please fill in your email address in the space provided on the right.

Lastly, if you're a buddy or a former student of mine, would you please do me the great kindness of hitting the Like button, the Google+1 button, and the Linked-In Share button above.  Thanks so much.  :-)

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Topics: residential realtors

Operating Expense Ratio II - What Ratio's Will Commercial Lenders Believe?

Posted by George Blackburne on Wed, Apr 4, 2012

In our first lesson on the Operating Expense Ratio, we said that borrowers and brokers had an incentive to understate their commercial property's operating expenses.  The lower the operating expenses, the larger the commercial loan for which the borrower can qualify.

 

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Commercial lenders therefore use the Operating Expense Ratio to see how much the borrower or broker is fudging his operating expenses.  Below are some reasonable operating expense ratios that commercial real estate lenders will believe:

  1. Multifamily:  35% to 45%
  2. Triple-Net Leased Buildings:  7% (Management and Replacement Reserves)
  3. Self Storage:  25%
  4. Mobile Home Parks:  25% to 40%  (Pool?  Clubhouse?  Closer to 40%)
  5. Hospitality (Hotels/Motels):  50% to 65%
  6. Assisted Living:  85% (That's NOT a typo.)

 

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The owner or broker would be foolish to try to get away with operating expenses that are too much lower than those shown above; otherwise, your commercial lender may apply some punitive assumption (say, a 45% operating expense ratio on a multifamily deal) that will just kill your deal.

Remember, pigs get pleasantly plump.  Hogs get slaughtered.

 

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Imagine having a list of 2,000 commercial lenders organized by state.  I will trade you a free copy of The Blackburne List for the contact information of just one banker who makes commercial real estate loans.  We solicit these bankers to refer their turndowns to C-Loans.

 

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Got a commercial loan that will qualify at some bank, but you just haven't found the right bank?  Remember, C-Loans.com is free!

 

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Topics: Operating Expense Ratio II