Commercial Loans Blog

Match the Size of Your Commercial Loan to the Size of the Bank

Posted by George Blackburne on Thu, Sep 27, 2012

Here is a simple but important rule:  Big banks like to make big commercial loans.  Small banks like to make small commercial loans.  The wise commercial mortgage borrower or broker will therefore match the size of his commercial loan request to the size of the bank to which he submits his loan.

Free List of 4,000 Commercial Lenders  Sort By Your Own Criteria

The reason has to do with legal lending limits.  National banks cannot lend more than around 10% of their capital and reserves to a single borrower.  Therefore, if your small, local bank has just $20 million in capital, it cannot lend more than $2 million to a single commercial mortgage borrower.

In real life, banks rarely make commercial loans larger than about 25% of their legal lending limit.  In practice, therefore, this small, local bank will probably seldom make a commercial real estate loan much larger than $500,000 (25% of $2 million).

At the opposite end of the spectrum, Wells Fargo Bank, the fourth largest bank in America, loves to make $20 million commercial loans.  Instead of making 40 commercial loans of $500,000; they only have to make one commercial loan of $20 million.  It’s a lot less work and far more profitable.

So what’s a big bank?  What’s a small bank?  A small bank arguably is any bank with less than $1 billion in assets.

What are a bank’s assets anyway?  Bank assets consist mainly of outstanding loans.  Deposits are liabilities because they eventually have to be given back to the depositors.

A large bank is any bank with more than $20 billion in assets.  There are about 50 banks in America with more than $20 billion in assets.

Submit Your Loan to 750 Commercial   Lenders Using C-Loans.com.  It's Free!

Click me

Click me

Free List of 200   Commercial Lenders

Click me

Click me

Put a Link on Your Site To Earn Huge Referral Fees

Click me

Click me

Click me

Fee Agreement and Fee Collection Course. Just $199.

Commercial Mortgage Brokers:  Buy Cheap Commercial Leads

Click me

Nine-Hour Video Training Course  How to Broker Commercial Loans

Click me

Topics: Commercial lender size