Commercial Loans Blog

Commercial Loans and the Importance of Speed

Posted by George Blackburne on Thu, May 7, 2015

Screaming_bossThe sales lesson that is today's blog subject applies to salesmen in just about any industry - be it commercial loan brokerage, commercial-investment property sales, or even car sales.  It sounds obvious - a salesman should call his leads quickly before a competing salesman reaches the customer first.  Duh.  As they say in the GEICO commercials, "Everyone knows that."

You would think so, but I just got off the phone with one of my loan officers, and I absolutely had to scream at him.  I gave him a world-class sales lead last night around 6:00 p.m., and when I spoke to him today around 4:30 p.m., he still hadn't call the lead.  Are you flippin' kidding me?!  I screamed so hard that my voice is now gone.  I mumble like the Godfather.  I'm  sitting here drinking wine at 5:00 p.m., just to calm my nerves and to keep from stroking out.  A salesman needs to call his leads quickly, before a competing salesman reaches the customer first.  Duh.  Everyone knows that.

 

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Over the past 15 years I have invested around $1.5 million in our wildly successful commercial mortgage portal, C-Loans.com.  You have all heard me boast about the success of the site - over 1,000 commercial loan closings totaling over $1 billion.  What you don't know is that C-Loans has never paid one red cent for advertising.  We get all of our commercial loan applications from organic seaches - not from the paid advertisements that you see above and along side the search results.  C-Loans.com provides great content because at the time I was writing all of those articles to train my sons, I truly thought I was about to keel over from heart disease.  (Recently I got wonderful news on that front.) 

 

Vascectomy

 

But it costs tons of money to run C-Loans.  Just to maintain the site costs me around $15,000 per month - not counting the improvements that we are constantly adding to the site.  Since the crash of 2008, last year was the first year we exceeded break-even.  Why would I be willing to lose $50,000 to $100,000 per year on a business for six straight years?  Because my hard money shop makes a ton of dough from the leads generated by C-Loans.

Wait a minute.  Blackburne & Sons is certainly one of the cheaper commercial private money lenders, but no private money commercial lender can compete with a bank.  And there are 450 to 500 different banks and credit unions participating on C-Loans.  How can Blackburne & Sons compete against these banks for commercial loans?

Now we have reached the point of today's blog article.  Success on C-Loans is all about being the first lender or broker to reach the borrower.  After that, the borrower stops returning phone calls.  (Please re-read those last two sentences.)  This is arguably the most important lesson we have to teach our participating banks.  It's all about calling commercial loan leads quickly.

My loan officers (except for the learning-disabled loan officer described above) have all learned to call their C-Loans leads quickly - immediately - even if they have a million distractions on their desk.  As a result, we have been consistently out-selling the sleepy, salaried loan officers at the bank.

 

Cinco_de_Mayo

 

The reality is that sales leads seldom come in when its convenient.  Leads come in when your kid is sick or just when you are about to take your beautiful girlfriend out for drinks.  Leads usually come in at the most inconvenient time.  The successful loan officer fields his lead calls immediately, even if it is extremely inconvenient.

Once a borrower has sent you a loan package - or once the buyer has signed a contract to buy the commercial-investment property - or once the car buyer has signed a contract to buy the car - he's not going anywhere.  Sure, you want to give the customer great customer service, but ultimately most of us are on commission.  Each of us needs to close sales, and the first salesman to reach a customer usually makes the sale.  So when a lead comes in, drop everything and work the stinkin' lead!  This way your Sales Manager doesn't stroke out, and you get to eat next month.  (I've just finished my third glass of wine, and I am mellowing.  I have decided to simply shoot my loan officer, rather than roast him slowly over a spit.  Sixteen hours to call a great lead?  Hmmm.  Maybe just a couple of hours over a spit first...)

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Everybody always looks at me as this great commercial real estate finance (CREF) guru, but it took me 35 long years to learn this business.  Remember, there were no nine-hour training courses in commercial real estate finance when I first started in this business.  Anyway, I still learn several new concepts about commercial loan brokerage almost every week.

I subscribe to an absolutely wonderful bi-monthly email publication called FinFacts by George Smith Partners.  As advanced in the industry as I am, these guys make me feel like a rookie.  These guys close the really large commercial loans.  (Don't be greedy-stupid.  Take a modest but numerically large referral fee!)

The folks at George Smith Partners are both life company correspondents (anybody out there remember 'ole George telling them that the real money in the commercial mortgage business is in loan servicing fees?) and commercial mortgage bankers for the really large commercial loans.

Anyway, in one of their newsletters this month, they used the term, "on-book capital providers".  So I asked my buddy, Bryan Shaffer of George Smith Partners, "What is an "on-book capital provider?  Is it the same as as a portfolio lender?"  

Bryan kindly responded:  "Yes. Using their own balance sheet. So, the same as a portfolio lender. Maybe a balance sheet lender may in the future sell the loan, but at least for now they are holding on their balance sheet. I only point this out because it not uncommon for balance sheet lenders to use docs that allow them to sell their loans into a pool in the future. Also today, several CMBS lenders use their balance sheets to do bridge loans that they hope to convert to a perm CMBS when it is ready."

Thanks, Bryan!

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I spent $50,000+ (in early-1980's dollars) on my Bachelor's Degree in Business and another $25,000 (in mid-1980's dollars) on my MBA.  I would do it again, but what really made me dough was learning commercial real estate finance (CREF).  Would you invest a lousy $549 and nine hours of your life to learn one of the most hoity-toity of all professions?  Only the rich own commercial properties.

 

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Idiot-rookie commercial mortgage brokers think that it's all about finding the cheapest rate and the best commecial loan terms for their commercial mortgage borrowers.  The old veterans - who close most of the big commercial loans - understand that the borrower, most of all, needs money.  At Blackburne & Sons, we will issue a Loan Approval Letter (often within 36 hours) for free!  The rates offered by most banks sound fabulous, but they turn down most deals.  Suddenly the timely offer from Blackburne & Sons looks awfully attractive.  This is how the old veterans got to be old veterans.  They first get a Loan Approval Letter  from Blackburne & Sons, and then they approached nearby banks saying, "These private money guys want to make me a commercial loan, but you can beat these these stinky 'ole terms, right?"  It's human nature.  Everybody wants to make you a commercial loan when another lender has made you a serious offer.

 

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Got a deal that clearly needs to be closed by a bank, conduit, or life company?

 

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Here's my intelligence test.  Would you trade the contact information of one loan commercial real esate loan officer working for the seventh largest bank in Iowa for a list of 2,000 bankers across the U.S. making commercial real estate loans?  Hmmm.  Tough decision.  (Guys, the only reason I make this grossly-favorable offer is because 95% of all commercial mortgage brokers - not my trainees - will move on to another industry within two years.  If you have decent smarts, this will probably be the single best business deal you will make in your lifetime.)

 

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You can now place business loans - loans NOT secured by commercial real estate - using C-Loans.  The super-nice thing about business loans is that they can close within twelve days, not four months!

 

Business Loans Not Secured By   Real Estate - Unsecured or Secured