Commercial Loans and Fun Blog

In my earlier posts about the Winds of War, I made the point that no country will ever use nukes again.  The resulting nuclear winter would end most life on earth.Need an example of a doomsday weapon not being used?  When the Russians rolled through East Prussia in their unstoppable march on Berlin, they were committing unspeakable atrocities against the East Prussian women.  (In defense of the Russians, they were merely giving the Germans a taste of their own medicine.)  The Germans had the option of using poison gas.  They didn't.  Nuclear weapons are no longer a deterrent.

This means there could now be a single, big winner of World War III.  The coming world war, I submit, will be quick, total, and economically profitable for the winner.  It will be a lightening war, much like the Six Day War in 1967.  You need to open your mind to the possibility that we will be playing the role of the Arabs.

Here is how I see this war playing out.   There are 1.4 billion people in China, and the Chinese are now ruled by a single man, President Xi Jinping.  In March of 2018, China approved the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life.  Whatever Mr. Xi says, goes.

The Chinese people are terrified of their government, and whenever a populace lives in constant fear of their government, they hate it.  As long as President Xi improves their lives every year, however, the Chinese people will tolerate him.

But here's the thing.  The students in Hong Kong are thumbing their noses at Xi, making him appear weak.  These students are also showing the rest of China how to someday remove Xi from power - using mass protests and riots.  He cannot allow these protests to continue forever.  

If Xi rolls his tanks into Hong Kong, thereby reaffirming the fear that China is out to conquer the world, the world's backlash would be huge.  Crippling economic sanctions would likely be imposed on China by much of the world.  These worldwide sanctions would greatly reduce China's exports, greatly reduce their GDP, and greatly reduce the standard of living for the average Chinese citizen.

Uh-oh.  Remember,  Xi has to steadily improve the economic lives of the average Chinese worker; otherwise, he and the hated, semi-corrupt, Communist Party will be swept out of power.  

The movie, Midway, came out a few weeks ago.  It is a terrific movie, and the audience, when I took my wife, even clapped at the end of it.   The special effects were terrific, especially during the attack on Pearl Harbor.

Do you know why the Japanese attacked us on December 7th, 1941?  Do you know why they risked awakening a sleeping giant?  Admiral Isoroku Yamamoto, their most brilliant Naval strategist, made this famous quote, the morning after the Pearl Harbor attack, "I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."

The answer is that America had imposed an oil embargo on Japan for attacking and occupying Manchuria and China.  At the time, Japan imported most of its oil from the United States and the Dutch East Indies (Indonesia).  After the American embargo, the Japanese had no choice but to invade Indonesia and seize its oil.  The same day, the Japanese attacked Pearl Harbor.

Interesting note:  I am married to a beautiful, exotic girl (for 37 years now), who was born in Indonesia to a Dutch father and a part-Indonesian mother.  Francisca's grandfather was the top executive for the Dutch Shell Oil Company in Indonesia, when the Japanese invaded.  Her grandfather bravely ordered that all of the oil wells in the country be set on fire.  The Japanese were not pleased.  They took her grandfather away in a  truck and shot him.  (See the picture at the top.)

Now if Xi rolls this tanks into Hong Kong, it will be the first domino in a long line to fall.  The crippling economic sanctions will force Xi to rail against the evil Americans and their stooges.  He will rally the people behind him by starting a war.  Tell me if you have heard this song before.

Under the the battle cry of, "Free the oppressed Taiwanese Chinese from the evil capitalists and imperialists," Xi will invade Taiwan.  The United States has a mutual defense treaty with Taiwan, so we will have no choice but to try to defend the country. Unfortunately, in the process, we will probably lose the 7th Fleet.

I recently saw a war games presentation of how the Chinese would likely destroy every ship in the 7th Fleet.  They would first swamp our fleet with drones and cheap missiles, and we would defend by using our arsenal of about 2,000 pieces of anti-missile and anti-drone ordnance.  When we are out of "bullets", they would send their carrier-killer hypersonic missiles far out to sea, to loop around behind our fleet and start taking out our largest ships. 

After taking Taiwan, the Chinese would next use its 300-ship Navy (13 more than ours today even before the massacre of our 7th Fleet) to start seizing islands to be used as missile bases.  Remember, the coming war will be a missile war, and even today's hypersonic missiles "only" have a range of 1,000 to 1,100 miles.  (Nuclear-powered hypersonic missiles, with an unlimited range, have yet to be perfected.)  

Less-expensive cruise missiles have a maximum range of about 550 miles.  The name of the game will therefore be island-hopping again.  If the Midway Islands are seized, GPS-directed Chinese missiles will be able to fly into specific windows of capital ships and important buildings at Pearl Harbor.

In the meantime, Chinese missile cruisers will be planting ship-launched cruise missiles into Boeing's missile and aircraft plants in Washington and into Lockheed missile and aircraft plants in California.  If the Chinese can also take out our shipyards in Long Beach and Oakland, with pinpoint missile accuracy, how long before we will be forced to sue for peace?  There will be no time to recreate our missile-making capability.  

The U.S. made a  number of fatal mistakes in the lead-up to this war.  Our first mistake was to fall so far behind China in our missile construction capability.  The second mistake was to waste scores of billions of dollars on aircraft carriers and their supporting ships.  They will be mere cannon-fodder in the coming missile war.  The Chinese, in contrast, had it right.  They built lots and lots of smaller ships.  You can even use an old, rust-bucket, Liberty Ship from World War II as a missile platform.

Will America win this war?  Will we survive long enough to catch up with our missile arsenal?  We're trying.  In one of my earlier articles about the Winds of War, I suggested that SpaceX's (Elon Musk's company) cluster of satellites, called Starlink, might allow the U.S. to pull its fleet back behind Midway Island, thereby increasing its survivability.  I was gratified and relieved to read that SpaceX is indeed now working with the military.

So could we win?  I don't think so.  I don't think that Xi will give us enough time to catch up to the Chinese in the missile production race.  A suburb of Indianapolis, located far from the West Coast, is looking like a decent place to try to survive World War III.  Am I serious?  Yes.  I tend to be early with my predictions, but I genuinely fear that we will fight and lose World War III in less than four years.

If Chinese tanks roll into Hong Kong, you need to start storing some long-term survival food.  After that, the dominoes may start to fall quickly - world economic sanctions on China, extreme economic distress in China, protest and riots against the rule of the Communists in China, the rallying of Chinese public opinion against America and its allies, the attack on the 7th Fleet, the invasion of Taiwan, the island hopping, the new island missile bases, the fall of Midway, the fall of Hawaii, the pinpoint destruction of our missile-making and ship-building capacity on the West Coast, and finally the capitulation and occupation of the United States.  

It's not as though China couldn't raise an extra two to three million soldiers to garrison the U.S.  Did you know that China has thirty million young men without wives?  Unmarried Chinese soldiers would make the perfect occupying force and a source of new husbands for our women citizens.  (Oh, goody.)  Sadly, too many Chinese parents left their baby girls out to die of exposure on some hillside 25-years ago during the One-Child Policy.  (In truth, most of these so-called abandoned baby girls were actually and thankfully snatched up and sent to relatives far away.)

With 350 million guns in the United States, we would be hard country to occupy; but  this thing about these extra thirty million young Chinese men without wives is a real phenomenon.  Yes, we could fight a guerrilla war, but the Chinese could also round up the population of entire states and put the people in concentration camps.  The British fought and won a guerrilla war in Malaya between 1948 to 1960.  It was one of the few victories against a guerrilla war.  They did it by rounding-up the population and holding the people in concentration camps.  Would the Chinese really land troops on American soil?  Geez, I hope not.  Reminds me of the Amazon Prime TV show, The Man in the High Castle.

Programmatic equity is a facility of capital; similar to a line of credit, but remember, equity is not debt; delivered by an equity provider to a sponsor of commercial real estate developments or value-add projects for a particular strategy that the sponsor is pursuing.  Typically, such facilities of equity capital are larger than $25 million.  The typical sponsor will have a high-net-worth and be extremely experienced.

A company named JCR Capital sent me an email flyer several months ago advertising their equity capital for value-add real estate investments.

Value-add commercial real estate investments typically target properties that have in-place cash flow, but they seek to increase that cash flow over time by making improvements to, or repositioning, the property.  In other words, the property has tenants, but they are paying substantially below the potential rent that the property could be getting.

In a value-add investment deal, the transaction’s sponsor makes an active effort to elevate the income stream of the property, typically through a significant capital improvement program, such as a partial or property-wide renovation.  Examples of such improvements might include new paint, new signage, renovating the lobby, and improving the security of the property and the parking area, etc.

In their marketing flyer, JCR Capital advertised preferred equity, joint venture equity, and programmatic equity.  Programmatic equity?  What the heck is programmatic equity?

Before we get into programmatic equity, lets first do a quick review of the term, "equity".  Equity is not just the difference between what your house is worth and the balance on your first mortgage.

Equity - in the context of real estate - is the money that the owner stands to lose before "the bank" loses its first penny.  Obviously, "the bank" could also mean a credit union, a life company, a conduit, or any other type of real estate lender.  

Equity is often referred to as the first-loss piece.  If anyone is going to lose any money on a real estate deal, the first guy to lose a chunk out of his tush is the equity holder (the owner).

Example:

ABC Development Company specializes in turning around big apartment projects that have become run down.  In downtown Washington, DC, ABC Development learns of a 360-unit apartment project within two miles of Capital Hill.  The well-located apartment project was once filled with ambitious, young political staffers; but when the old man died, and his wife took over the management, the condition of the property and the rents plummeted.

ABC Development can acquire the property for just $32 million, but the renovation costs are another $9 million.  With an interest reserve and the other necessary soft costs, the total project cost is $46 million.  The bank, with whom ABC Development has a relationship, will only loan up to 70% of the total cost because the project has become a big drug house and a gang hang-out.  

A huge renovation project like this needs to be structured like a construction loan.  Who remembers the four elements of Total Cost?  Of course, there is the land cost (in this case, the cost of the land and the building), and then there are the hard costs (bricks and mortar).  What else?  Soft Costs - that's right!  Good job.

But you are still forgetting the fourth element of Total Cost (of a development project). It's the contingency reserve.  A good rule of thumb when computing the contingency reserve is to use 5% of hard costs and soft costs.  Why not 5% of the land cost?  Because by then the developer already knows the cost of the land.  There is NOT going to be a cost overrun in connection with the land.

Therefore the total cost of a development project is the land cost, plus the hard costs, plus the soft costs (interest reserve, architectural fees, engineering fees, points, closing costs, etc.), plus the contingency reserve.

Okay, now let's get back to ABC Development's big value-add deal.  We said the total cost was $46 million, and the bank was willing to lend $32.2 million - which is 70% of the total cost.  Therefore ABC Development will need to contribute $13.8 million.  The development company has $3.8 million to contribute, so it will need an equity provider willing to put up the remaining $10 million.

This is the type of value-add deal that would be perfect for the nice folks at JCR Capital.  Their transaction sizes include equity contributions of between $5 million and $50 million nationwide.  (We are talking large deal sizes here, folks.  The property should at least be worth $20MM.)  You can reach my buddy, Sam Isaacson, at JCR Capital at 917-902-1421.

Okay, But What the Heck is Programmatic Equity?

As Sam explained to me, "Programmatic equity is where we provide a facility of capital, say $25 million to $50 million of committed capital, for a particular strategy that a sponsor is pursuing."

Example:

Let's suppose that a developer specializes in buying large, older, mobile home parks, and then the developer repaves all of the streets, tears out the landscaping and puts in far-nicer lawns and bushes, puts in a new pool and a new clubhouse, enforces the park rules about skirts and storage sheds, squeezes out the mobile homes being used as rentals, squeezes out the ugly and/or single-wide coaches, and then dramatically raises the rent.

When everything is stabilized, the developer then sells the mobile home park to a REIT.  This is his program.  He has flipped four parks already, and he has identified fifteen other parks in need of his program.  He needs just $3 million in equity to satisfy each bridge lender providing the underlying first mortgage, but in order to renovate all fifteen parks, he might eventually need a total of $45 million in equity.

A provider offering programmatic equity might go all the way down to just $3 million on each mobile home park because the sponsor will be doing 15 of these projects.   The provider might offer the developer a capital facility (kind of like a line of credit) of $30 million in equity to start renovating these large, old, mobile home parks.

Today's article contains great news for investors and brokers alike.

According to an important Bloomberg article published this week, the economic boom currently being enjoyed in America will probably not result in an extra big bust, according to the work done by the Nobel-prize-winning economist, Milton Friedman.

You may recall that Milton Friedman was a famous economics professor at the University of Chicago from 1947 to 1977.  Friedman was the foremost proponent of the Monetarist School of Economics, and once famously said, "Inflation is always and everywhere a monetary phenomenon..."  In everyday English, he meant that if a government creates a lot of new money, there is going to be a ton of painful inflation. "Inflation is taxation without legislation," was another one of Friedman's famous quotes.

In 1964, Milton Friedman developed an economic hypothesis called the Plucking Model.  The Plucking Model holds that the economy is like a string on a musical instrument — recessions are negative events that pull the string down, and after that it bounces back, like a guitar string.  But here's the thing:  When you pluck down on a guitar string, it only snaps back to its original position.  It doesn't go careening to the other side of the neck.

And just as a string snaps back faster if you pull it harder, the Plucking Model holds that the deeper the recession, the faster the recovery that follows.  But you can only pluck the economy in one direction; bigger expansions don’t lead to bigger recessions!

But is the Plucking Model true?  "Friedman proposed the idea in 1964 and argued that if he was right, future recessions would show a correlation between the depth of the bust and the speed of the recovery that followed.  He then waited 20 years to see if his predictions were borne out.  In 1993, he looked at the business cycles that had happened in the intervening years, and he concluded that he'd been right."

"Since then, others have found more evidence to support the plucking idea.  A 2005 paper by economist Tara Sinclair used advanced statistical techniques to confirm that, in the United States, bigger recessions are followed by faster recoveries — but not the other way around.  If you pull that guitar string really far - bam - it snaps back blazingly fast; but bigger recoveries don't produce faster recessions.  In other words, when a big expansion starts to end, an economy doesn't instantly plunge in a deep, dark recession."

After the Great Recession of 2007-2009, researchers looked at European countries and concluded that those that had it worse in the downturn ended up bouncing back faster.  In other words, those European countries which saw their GDP's fall the furthest were the first to recover.  

But there was no correlation between how well a country did before 2007 and how much it suffered afterward.  In other words, those countries which enjoyed the biggest increases in GDP did NOT suffer worse than the countries who fared only so-so in the preceding expansion.  All this evidence implies that recessions cause recoveries, but that booms don't cause busts.

But why does this happen?  The answer is that it's easy to give people raises, but it's hard to make them swallow pay cuts.

In good times, growth simply feeds into higher wages (as well as higher profits). But when a recession or other negative shock comes along that hurts corporate earnings, employers might like to cut wages, but they can’t.  Instead, they lay off workers.  The more workers who get laid off, the bigger a pool of unused labor there is, so the faster the economy can grow once the recovery takes hold.  Makes perfect sense, huh?

All of this is great news.  We can now forget about the Sword of Damocles hanging over our heads and truly enjoy this expansion.  Yes, we will eventually have another recession, but it will probably not be a horrible one.

Sword of Damocles

The famed “sword of Damocles” dates back to an ancient moral parable popularized by the Roman philosopher Cicero in his 45 B.C. book, “Tusculan Disputations.”

Cicero’s version of the tale centers on Dionysius II, a tyrannical king who once ruled over the Sicilian city of Syracuse during the fourth and fifth centuries B.C.  Though rich and powerful, Dionysius was supremely unhappy.  His iron-fisted rule had made him many enemies, and he was tormented by fears of assassination—so much so that he slept in a bedchamber surrounded by a moat and only trusted his daughters to shave his beard with a razor.

As Cicero tells it, the king’s dissatisfaction came to a head one day after a court flatterer named Damocles showered him with compliments and remarked how blissful his life must be.  “Since this life delights you,” an annoyed Dionysius replied, “do you wish to taste it yourself and make a trial of my good fortune?”

When Damocles agreed, Dionysius seated him on a golden couch and ordered a host of servants to wait on him.  He was treated to succulent cuts of meat and lavished with scented perfumes and ointments.

Damocles couldn’t believe his luck, but just as he was starting to enjoy the life of a king, he noticed that Dionysius had also hung a razor-sharp sword from the ceiling (see the picture at the top).  It was positioned over Damocles’ head, suspended only by a single strand of horsehair.  From then on, the courtier’s fear for his life made it impossible for him to savor the opulence of the feast or to enjoy the servants.  After casting several nervous glances at the blade dangling above him, he asked to be excused, saying he no longer wished to be so fortunate.

Haha!

A buddy of mine - an old veteran in the commercial loan business - sent me an email marketing flyer last week.  He had just closed a big commercial loan, and he was telling me about his special new program - a sort of fix-and-flip loan for large commercial properties.

Here is how my buddy described his new program in his marketing piece:

"Low-Cost Non-Recourse Gap Equity - We are under application on several opportunities to bring high octane capital to new construction and deep rehab projects at a coupon rate of starting in the 6's with no equity participation."

"Our investor funds his last dollar to 85 to 90% of cost on new construction and up to 100% of qualified renovation costs.  Our active pipeline includes multifamily, senior housing, and hotel projects."

Confused by his flyer, I wrote to my buddy and asked, "What on earth does last dollar mean?"   He wrote back:

"Let's assume the total capitalization of a renovation project is $10 million - with an $8 million purchase price and $2 million in the projected hard costs of renovations."

"Our investor funds up to 90% of the $8 million purchase price, or $7.2 million, and 100% of the hard renovation costs, or $2 million - for a total loan proceeds, based on cost, of $9.2 million."

"This assumes the property's After Renovation Value (ARV) is $13.2 million, since our lender limits loan proceeds to 70% of ARV."

"This gap equity program for commercial properties sounds terrific," I told my buddy, "but I still don't understand what last dollar means!"  My buddy must have thought that I was mentally-challenged.

Kneeling down and speaking very slowly to his slow-witted friend, my buddy explained:

"Last dollar refers to the highest loan-to-value reached when a lender loans his very last dollar.  (See the pic at the top squeezing out the last dollar.)  The term is used most often when mezzanine loans or preferred equity investments are stacked on top of very large permanent loans.  The permanent lender's last dollar is 60% LTV, the mezzanine lender's last dollar is 75% LTV, and the preferred equity provider's last dollar is 85% LTV."

At last the light bulb clicked on for me.

But wait a minute.  In trying to explain last dollar, my buddy described an incredible way to reach very high leverage on new construction deals and commercial renovation projects.  Eighty-five percent of cost for new construction?  Perhaps as high as 90% of cost?  Plus 100% of renovation costs?  This is fantastic! 

The program is also non-recourse.  The minimum loan amount is $3 million, and the maximum loan amount is  $200 million.  

This lender will make these high-leverage new construction loans and commercial renovation loans nationwide.  Acceptable property types include multifamily, senior housing, hotels, and several other standard property types.

Got a potential deal?  Please email me, George Blackburne III, no more than three sentences, along with your contact information.  Please type into the Subject line, "Gap Equity Program."  I'll make sure that the opportunity gets to my buddy.

You might even text me a message to 574-360-2486, "Just sent you a gap equity request."  I get an average of 1,350 email per day - every day - so its easy for me to miss emails.  Why don't I employ a junk mail filter?  I live in Indianapolis - a beautiful city, but a bit of a financial backwater.  Mortgage flyers are my window to the industry, and I don't want to miss a single one.  Add me to your newsletter list, so I can steal your jokes.  :-)

By the way, I had to look up the term, high-octane too. High-octane, in this context, means exciting and full of energy.  My buddy was specifically using the term high-octane to refer to a loan that is very high in terms of loan-to-cost.  

It's no fun being slow-witted; but it really helps when I teach.  Since I have to reduce difficult concepts to baby language in order to learn, I teach the same way.  Haha!

Cute Halloween joke:

Mr. and Mrs. Hill, along with their three children, were on a touring holiday in Transylvania, where they stopped for the night in Count Dracula's castle.  
During the night, the evil Count sucked the blood out of all of them and put them in coffins in his vaults.

  The next night, Dracula sat by the organ thundering out loud music, while down in the cellar the poor Hills stirred in their coffins.  They made their way up to the organ gallery, and when Dracula saw them, he said, "Welcome to the Vampire Club.  The next tune is especially for you."

  And guess song he began to play?

  "The Hills Are Alive to the Sound of Music."

Are referral fees legal on commercial loans?

Absolutely, yes!  Final answer.  Remember, I am an attorney, and my private money commercial mortgage company - Blackburne & Sons - has happily been paying referral fees on commercial loans for almost forty years.

Don't I have to be licensed?

Only nine states that I know of - California, Arizona, Arkansas, Florida, Maryland, Nevada, North Dakota, South Dakota and Wisconsin - even require a license to broker commercial loans.  (Careful.  There may be one or two more.)

Therefore, most states have no licensing requirement whatsoever to broker commercial loans.  The state licensing scheme might read something like, "A license is required to broker mortgage loans."  This language makes it seem like a license is required to broker commercial loans... until you look up the definition of "mortgage loan".   A mortgage loan is defined as a loan on a one-to-four family dwelling.

But even in states that require a license to broker commercial loans, referral fees are perfectly legal, as long as you do not negotiate loan terms or try to fetch documents.

Therefore, in states requiring a license to broker commercial loans, you must never talk to the borrower about interest rates, points, the term of the loan, or the prepayment penalty.  In those nine states, you must not collect tax returns or financial statements for the lender.

But as long as you work on a name and number referral basis only, then you are perfectly legal in EVERY state.

How large is the typical referral fee on a commercial loan?

C-Loans.com once paid a referral fee of $21,250.  Wow.  The loan amount was $17 million, so a referral fee of this size is pretty rare.  

More commonly, the typical referral fee on a commercial loan is around $1,000 to $2,000.  That ain't hay for just a name and a phone number.

The most common formula is some percentage of the lender's or mortgage broker's loan fee - usually either 10% or 20%.  Blackburne & Sons pays a referral fee on commercial loans of 20% of our net loan fee.

How do I refer commercial loans?

If you know how to recognize a hard money loan, and you want to refer a commercial hard money loan to Blackburne & Sons, please call our office at 916-338-3232 and ask for a loan officer.

You can also email Alicia Gandy or George Blackburne IV (age 35), our loan officers,  and deliver the lead this way.

Most of you guys are not experts in commercial real estate finance, however, so you would be wiser to just send your referral leads to me, George III (the old man), by inputting your commercial referral leads here.  Be smart.  Please bookmark this Referral Leads Input Form right now.

Want to earn huge referral fees in your sleep?

Do you remember that $21,250 referral fee that I mentioned above?  We paid that huge fee to a guy named Alan Dunn, and Alan was asleep when he sent that lead to us.

What?  Huh?  How could he be asleep when he referred that $17 million commercial loan?  Alan Dunn created a link on his website entitled, "Commercial Loans", and he pointed that link to C-Loans.com.

C-Loans.com is programmed to capture the URL of the referring site.  When this big $17 million loan closed, we looked up the loan application.  Automatically printed at the bottom of the loan application was the URL of Alan's website.  Imagine Alan's surprise when he got a call, "Hey, Alan.  We have a check here for you for $21,250!"

How can I be sure that I won't be cheated?

In truth, you can't be sure, but it may give you a little confidence to know that I am an Eagle Scout, and so are both of my sons.  My sons and I also went to Culver Military Academy, where we lived under an Honor System.  A cadet does not lie, cheat, or steal.  

I am attorney, licensed in California and Indiana.  My family hard money mortgage business also services about $45 million in hard money loans for about 900 private investors.  The average daily balance in our trust accounts is on the order of $300,000 - and after payoff's, that amount can surge to over $1 million.  We have also been servicing hard money commercial loans for our elderly private investors for almost 40 years.

My point is that if we were ever going to become crooks, we probably would have run off with at least $1 million out of our trust accounts thirty years ago.  :-)  And there was no way that Alan Dunn would have known about his big loan closing, but for our family honor code.

But watch out for the link police.

A referral partner of ours made the mistake of adding too many links to C-Loans.com on his website.  The poor guy had his front door kicked in by the FBI at 3:00 in the morning.  They dragged him out of bed, beat him batons, and took him away.  Despite the frantic pleas of his wife, he was never heard from again.  Guantanamo?  All because he put too many links to C-Loans.com on his website...

By now you have probably figured out that I am joshing you.  Haha!  There is no law against putting six or seven links to C-Loans on your website.  You can put some links at the top of your pages, some at the bottom, some in the middle, and some in the body of your articles.

The links might say, "Commercial Loans", "Commercial Mortgages", "Commercial Financing", or "Apply for a Commercial Loan."  The more links you create, the more chances you have of earning some huge referral fees.

Note:  Our referral fee links do NOT work in emails.  Please call Tom Blackburne at 574-210-6686 if you have a regular email newsletter.  He will create a special kind of link for you.

How large of a referral fee does C-Loans.com pay?

Our hyperlink referral fees are 12.5 basis points.  For example, on a $4 million loan, your feral fee would be 0.125% of $4 million - which equates to $5,000.

Important Note:  On deals larger than $5MM, closed by banks, credit unions, life companies, and agency lenders, C-Loans itself only earns 25 basis points.  Our referral fee is then 8.33 basis points.

So give yourself a chance to make some serious dough in your sleep.  Now a confession.  We don't know for sure that Alan was actually asleep when his borrower found his Commercial Loans link, but he certainly could have been!  Haha.

Were you wise enough to open and bookmark this Referral Leads Input Form?

If you are a well-heeled real estate investor or a commercial real estate broker, you really need to pay attention to today's article.  I am going to show you how to use a USDA commercial loan to obtain 90% leverage on a rental property (not just on an owner-occupied property) in an Opportunity Zone.  For once, the Federal government is going to help you, even though you had the selfishness to work hard and build wealth.

Commercial loan brokers:  Please sit up and focus.  You can make some serious money brokering USDA commercial loans, and very few borrowers and competing mortgage brokers know much about the program.  Yesterday we got a loan approval on a $5 million USDA Business and Industry loan.  Our fee will be $25,000.  That's gonna pay some bills.

Quick Joke:

An old farmer wins the ten-million dollar lottery and is being interviewed. The reporter asked what he is going to do with all the money.  "Oh, I reckon the first thing I'll do is go and pay a few bills."  "And what about the rest?" the reporter continued.  The farmer shrugs. "Well, I guess they'll just have to wait."

Now on to USDA Commercial Loans:

Many of the poorest people in America live in small towns or in very rural areas.  In order to help these people get better paying jobs, the USDA has developed a commercial loan program that is very similar to the SBA loan program.  It's called the USDA Business and Industry (“B&I”) Guaranteed Loan Program.

The USDA Business and Industry ("B&I") Guaranteed Loan Program is a loan guarantee program designed to assist credit-worthy rural businesses obtain needed credit for any legal business purpose. The intent is to save and create jobs in Rural America.

Business headquarters located in cities or towns with a population of less than 50,000 qualify as Rural America.  A quick glance below will show you just how much of the country is eligible for a USDA B&I loan.  White means eligible:

In most cases, a borrower who qualifies for an SBA loan will also qualify for a USDA commercial loan, but why bother with a USDA commercial loan?  Why not just apply for an SBA loan?

• The maximum loan amount for a USDA loan is a whopping $25 million, and this loan amount can sometimes even be increased.  The maximum loan amount for an SBA 7a loan (the 25-year adjustable loan program) is just $5 million. The maximum loan amount on a SBA 504 loan (the fixed rate program) is just $10 million.

• USDA B&I loans are amortized over 30 years, rather than just 25 years.  This means that they have lower monthly payments.

• The USDA will guaranty 15-year commercial loans on equipment, rather than just 7 years on SBA loans.  This significantly frees up cash flow.

• USDA B&I loans have no balloons, which saves new loan fees, new closing costs, and new third-party property fees.  In contrast, the underlying first mortgage on an SBA 504 loan has a term of just ten years.  Tick-tock.
  
  

• USDA commercial loans do NOT have to be owner-occupied!!!  Wealthy investors can qualify for B&I loans.  Suppose an investor wants to renovate an old, vacant industrial property in the Boonies (see picture at the top) and lease it to a manufacturing company willing to move to a rural area. The USDA will guarantee such a loan, even though the loan is arguably a subsidy to the wealthy investor.

• The USDA will guarantee commercial loans of up to 90% loan-to-value, even to investors.  If the loan-to-value ratio is going to be a full 90%, the tenant has to be an existing, experienced company.

• Imagine a wealthy investor combining the the high-leverage and low interest rate of a USDA B&I loan with a property located in an Opportunity Zone!  Wow.  $$$.

• Unlike SBA loans, where the interest rate is set by rule and long-custom, the interest rate on USDA commercial loans is individually-negotiated between the parties.

• The interest rate on a USDA B&I loan can be fixed or adjustable.

• Individual investors, rather than just for-profit companies, can qualify for a USDA-guaranteed B&I loan.

• Non-profits, cooperatives, Federally-recognized tribes, and public bodies are also eligible for USDA commercial loans.

• Few SBA lenders are enthusiastic about making large commercial loans in very rural areas.  Remember, only a portion of an SBA loan is guaranteed by the Federal government.  SBA lenders therefore have a piece of their own tushes exposed and at risk on every deal.  SBA loans in Bum Flowers, Egypt are not terribly appealing to most banks.  The USDA B&I loan fills this void.

• A single lender will usually makes the entire USDA commercial loan. There is no need to bring in a community development corporation to make the second mortgage and a conventional lender to make the underlying first mortgage.  Anyone who has ever gotten an SBA 504 loan can testify that the complicated SBA 504 process can be slow, buggy, and maddening.

If you need a USDA commercial loan of less than $1 million, you will want to enter the deal into C-Loans (just click the blue button below).  It's free, and it will take just you just four minutes to create your C-Loans app.

You can then shift your C-Loans app from USDA lender to USDA lender in seconds, until you find one willing to do your deal.  Remember, because each USDA lender will have some of his own money at risk (the USDA only guarantees a portion of the loan), the Loan Committee of each bank will look at the deal differently.  The secret is to just keep submitting your deal until you find the right fit.  This is the secret of C-Loans.

By the way, after you have created your C-Loans app, be sure to click on the button, "Create a PDF", at the bottom of the page.  You will then have a gorgeous PDF of your deal that you can then submit to your own USDA lenders.  

And be sure to write to Tom Blackburne afterwards and claim your two free commercial finance training courses - something you earn every time you enter a new commercial loan into C-Loans.com.  There are four courses / tools from which to choose.

But if you need a USDA loan of greater than $1 million, would you please send a brief summary (just a few sentences), along with your contact information, to me, George Blackburne III?  Thanks!  I am hungry to close a few more of these big puppies.  I get 1,350 emails every day (no kidding), so please be sure to make the subject line read exactly, "I Need a Big USDA Loan."  You might even text me at 574-360-2486 and say, "Just sent you a USDA loan."  Thanks!

If the world's money supply starts to contract again, like it did in 2008, commercial real estate investors and those of us in the commercial loan business are going to be painfully affected

First of all, please grasp the concept that the biggest risk facing mankind is not global warming, a nuclear war, a conventional world war (World War III with no nukes), or some new viral pandemic.

No, the biggest risk facing mankind - because it is far, far more likely - is another global deflationary depression.

Imagine a world where huge corporations go bankrupt by the thousands, where the unemployment rate soars to 40%, and where one-hundred-million Americans wander listlessly like Zombies, trying to survive on the tiny Welfare payments provided by the government.  This is what a deflationary depression looks like.

Could it happen?  Easily.  All it would take would be for the banks to stop lending.  Remember, cash only constitutes 8% of the world's money supply.  The rest of the world's money supply is digital money, and almost all of that digital money was created by fractional banking.  More on fractional banking in a moment.

Here's how it works.  The Fed, for example (it works the same way in the EU), buys $1 billion worth of Treasury bonds from Bank A.  Suddenly Bank A is flush with cash, and it needs to put that cash to work.  It is required to keep $50 million (5%) in reserves, and then it loans out the remaining $950 million to Advanced Missile Devices, Inc.

By the way, I am so convinced that a missile war with China will happen in the next 3.5 years that I just moved 20% of my retirement account into the stock of six U.S. missile manufacturers - Lockheed Martin, Raytheon, Northrup Grumman, Boeing, General Dynamics, and United Technology.  As I see it, we don't actually have to go to war for these investments to pan out.  America's is now embarking on a crash missile development program.

Did you know that China now has new air-to-air missiles with almost twice the range of our our best air-to-air missiles.  They will be able to shoot down our jets long before we even get into range.  It's kind of like the English long bow versus the French crossbow.  Heavens, I pray that a shooting war doesn't develop with China.  They would probably win, even without Russian, North Korean, or Iranian help.  We are very, very far behind in missile technology.  

Okay, so Advanced Missile Devices spends the $950 million of the $1 billion loan from Bank A, and the proceeds of that loan end up in Bank B.  Bank B then makes makes a $902.5 million (95% of $950,000) loan to Blue Cloud Computing Corp.  Blue Cloud spends the proceeds, and those proceeds end up in Bank C.  Bank C then loans out 95%, and the proceeds up in Bank D; and so on.

By the time it's all done, the money supply of the United States has just increased by a total of $20 billion.  That's a 20-fold increase (20:1) of the Fed's injection into the money supply of just $1 billion.

The authority of a bank to loan out money entrusted to its care is known as fractional banking.  Banks don't have to keep their deposits just sitting in their vaults, like an old-time goldsmith.  They are allowed to lend it out, as long as they keep a fraction (about 5%) in reserve.

This money-creating phenomenon is known as the Multiplier Effect, and it has been going on for hundreds of years.  The Multiplier Effect is not some capitalistic evil.  By creating new money that needs to be invested somewhere, newly created bank money has helped to finance huge technological advances, like canals, railroads, billion dollar computer chip manufacturing plants, and Elon Musk's new giga-factory for car batteries.

But here's the thing.  The multiplier effect works in reverse - and this is where things get really, really scary.  If a U.S. bank takes in a loan payment of $1,000 - and it is too nervous to lend it back out - $20,000 gets sucked out of the country's money supply.  It's a factor of 20:1.  The multiplier effect works in reverse.  Grasp this important concept:  The multiplier effect works in reverse.

Not scared yet?  Banks have outstanding about $6 trillion in loans.  If we assume an average annual interest rate of 6%, this means that every year $360 billion flows back to the banks in interest payments.  

Now let's suppose the banks get scared, and they only lend back out $160 billion.  Wearing helmets and World War I gas masks (see picture above), they hunker down in their financial bunkers, hoarding the remaining $200 billion in loan payments.

Get ready for it... twenty times $200 billion is $4 trillion dollars!  This is what happened in 2008.  About $4 trillion disappeared from the U.S. money supply in abut one year.  Ouch.  Not coincidentally, this is about the size of the increase in the Fed's balance sheet during the Great Recession.  By buying up trillions of dollars worth of outstanding Treasuries, the Fed was able to re-inflate the U.S.money supply. 

Okay, so you now see the danger of a bank slowdown in lending - horrible deflation.

Finally the Point of Today's Article:

An important research paper was just released that showed that negative interest rates reduce bank lending.  

Why?  Lower interest rates squeeze bank margins, meaning they have less money to build their capital reserves.  Capital reserves are the funds the owners of the bank chipped in to create the bank originally and the profits from prior years that the owners left in the bank in order to grow the bank.  They are the reserves of the bank to cover future losses.

Banking regulators don't allow banks to grow if their reserves don't grow proportionately.  Sometimes banks are legally required to shrink if their reserves fall too low.  

How do banks shrink?  They stop making new loans and hoard their incoming loan payments.  What happens to the money supply when banks stop making new loans?  Twenty-to-one, remember?  Company failures, mass layoffs, and a deflationary depression..  

Negative interest rates reduce bank lending?  It's as if gravity just got stronger.

I have an exciting story for you today about the darkest hours of the Great Recession; but first some background.  

Something really-really weird is happening in finance.  Interest rates just keep falling, and this affects us in the commercial loan business.  This is actually quite positive for you and me.

I have written to you several times about how there are more than $16 trillion in Japanese and European bonds now selling at a negative yield.  Can you imagine loaning $1,000,000 to the German Federal government, receiving no interest payments for ten years, and then only getting $970,000 back at the end?  It seems unimaginable.  Somebody pinch me.  This can't be real.  

Interest rates in the United States resumed their downward march this week.  Ten-year Treasuries are known as the long bond (even though the U.S. Treasury also sells a 30-year bond).  Yields on the long bond, after rising sharply three weeks ago, are once again approaching just 1.5%.  

I predicted three months ago that ten-year Treasuries would fall below 1% within two years.  Yields on the long bond may break below 1.0% even sooner than that - on their way down to negative yields.    (The yield on the long bond was just 1.54% as of yesterday's close.)

You might think that the reason why interest rates are falling is because of the Fed.  You're on the right track, but the central bank that is really stirring the pot is the European Central Bank ("ECB").  The population of Europe is old, and it is shrinking.  Most countries in Europe are desperate for workers, and Sweden, Germany, and Norway are actively recruiting them.

Because the counties of Europe are withering, at least in terms of reproduction, the ECB must constantly inject fresh Euros into the EU economy; otherwise, the European money supply would contract like a black hole.  Without Central Bank intervention, the money supply in Europe could easily shrink by 40% in less than six months.  We saw this happen in 2008, at the beginning of the Great Recession.
 

My Exciting Story:

Our Fed Chairman in 2008 was Ben Bernanke, and he was an absolute hero.  By quickly injecting $4 trillion back into the U.S. economy, Ben replaced the $4 trillion that had disappeared from our money supply when U.S. banks stopped lending.  

At one point, the commercial paper market had completely frozen up.   Commercial paper is those 30-day IOU's issued by giant corporations to pay their bills.  The Big Boys use commercial paper market, rather than borrowing from banks, because it is cheaper.

During the darkest hour of the Great Recession, investors stopped buying commercial paper.  Suddenly General Motors, General Electric, Ford, John Deere and the other big corporations didn't have enough dough to make their payrolls.  Millions of workers would have to be laid off, with no warning and no severance pay.  Literally, the world was in danger of ending.

In stepped Big Ben, the superhero, with his hair (if he had any) and his cape blowing bravely in the wind.  "The Fed hereby guarantees all commercial paper!" he boldly announced.  Confidence was instantly restored to the commercial paper market.  The financial world was saved,  Widows and frightened kittens were rescued.

But here's the thing.  Neither Big Ben, nor the Fed, had no the legal authority to make that announcement or to guarantee that debt.  Big Ben saw what needed to be done, and he just did it.  Swish.

Closing In On My Point:

In order to prevent the entire money supply of Europe from contracting into a black hole (the multiplier effect working in reverse), the ECB has been forced to constantly inject new Euros into the European economy.  Many of these Euros end up in the hands of old gomers like me, and we hoard our savings because we are close to retirement.

Now old gomers are not going to keep one million Euros stuffed under their mattresses, so they take their cash down down to the bank and try to deposit it.  "No, thank you," says the bank.  "We have more than enough deposits right now.  We don't have any place to invest them."

In fact, there are so many banks bidding to own German, Danish, Dutch, and Swedish treasury bonds, they have bid up the prices of the bonds so high that the yields are negative - say, a negative yield of 0.15% annually.

Get Commercial Leads For Less Than Two Cups of Coffee

Now back to our desperate old gomers.  "You simply must take my cash, Mr. Banker.  If bad guys learn that I am keeping one million Euros under my mattress, they will break in and kill me!"  So the banker says to the depositor, "Okay, we'll accept your deposits; but we are going to charge you a negative yield of 0.5% per year."  In other words, the old gomer is paying the bank one-half percent per year to hold his cash.

Then the banker invests in bonds with a negative yield of just 0.15%, and the banks profits off the 35 basis-point difference.  A basis point is 1/100th of one percent.

Finally My Point - Phew!

European investors are going to keep buying U.S. Treasuries because our yields are positive.  This will keep driving down U.S. interest rates for the foreseeable future.  Sure, we'll have some periods when interest rates will spike back upwards; but the long-term trend for interest rates is still downwards.

The money in commercial real estate finance is in loan servicing.

We are living in an Age of Disappearing Income.  I like that term - the Age of Disappearing Income.  I didn't invent it, but it is very apt.  Pretty soon retired investors will not be able to find any safe investments with a positive yield

Why This is Great News For You and Me:

Interest rates on commercial loans have fallen so far that most commercial property owners would be crazy not to refinance right now.  If you use C-Loans.com, you can get a ten-year commercial loan with a yield of just 4.09% to 4.84%.

The danger in waiting for even lower rates is that we are headed for a garden-variety recession.  During recessions, commercial property values fall and commercial lenders cut their loan-to-value ratios way-way back.  Right now the porridge is just right.  Climb out of that comfy, perfect bed and apply for a commercial loan using C-Loans.com right now.

You may find this shocking, but the successful commercial loan broker today will devote 60% of his working hours to marketing for commercial loans, as opposed to lead negotiation, lead follow-up, commercial loan packaging, or commercial loan placement (actually finding a commercial lender).

Now, of course, the successful commercial loan broker will still eventually have to call and work his leads, follow up on them, organize his commercial loan packages, and pitch his commercial loans to a bank.  But if he wants to make steady dough, he needs to focus mainly on marketing.

The commercial loan market today has changed.  In the old days, there were only about 250 active commercial lenders in the entire country.  The commercial loan officers working for these 250 commercial lenders were buried with phone calls and packages.  They despised taking calls from rookies with commercial loan deals that were obviously not do-able.  They tossed away away any commercial loan package that was not prepared by a pro. 

In these olden days, the successful commercial loan broker therefore had to spend hours and hours preparing his Schedule of Leases, preparing his Pro Forma Operating Statements, computing all of his ratios, and organizing his loan commercial loan packages into a beautiful presentations, just so that they looked perfect before approaching his lender.  The commercial loan broker had to do all of the work.

Today, however, there are 4,900 commercial banks and over 6,000 credit unions in the United States.  Just about every one of them is scratching and clawing to make commercial real estate loans these days.

Therefore, you hardly have to sell a banker on making a good commercial loan these days.  You simply have to find one.

Let me put this another way.  You can limp in a butt-ugly commercial loan package to a bank or credit union these days, and if the loan is a good one, the bank or credit union will jump all over it.  You don't have to impress the banker with your package and sell him on your professionalism.  

You just have to find good commercial loans!!!  So focus on what's important.  Focus on what the market wants you to do.  Focus on finding good commercial loans.

Most commercial mortgage brokers, unfortunately, devote less than 15% of their time to marketing for commercial loans.  Instead, they devote the vast bulk of their hours to trying to place a $5 million loan on a money-losing bowling alley in some hollowed-out city or a $20 million construction loan on a new resort in Mexico.

Get Commercial Leads For Less Than the Cost of Two Cups of Coffee

The typical commercial real estate loan officer working for a life company, bank, credit union, or a hard money lender will take at least 40 to 50 phone inquiries and will underwrite 10 to 15 loan packages for every loan he approves.  Commercial real estate lending therefore is an immense sifting and sorting process.

One of the key values that you will add as a commercial mortgage broker is to help your lender sift and sort through dozens and dozens of loan requests to find that one deal that makes sense.  Your job is NOT to grab ahold of the first loan request you find - say, a $10 million land loan on scrub grass in the desert of California - and then spend 20 precious working hours trying to place a deal that is not do-able.

Instead, your job is to say to your borrower or realtor, "I'm sorry, Bob, but in today's market, I'm not sure anyone will finance this project."

Therefore, it is my opinion that the typical commercial mortgage broker should devote SIXTY PERCENT (60%) of his time to marketing for commercial loans!

When a lead call comes in, you should quickly qualify it over the phone.  If this is a purchase money deal, how much cash is the borrower putting down?  If this is a refinance, and he needs an 80% LTV loan, or higher, to pay off his existing lender, kill the deal.  

What is the borrower's net worth compared to the loan size?  It should be at least equal.  Got an auto mechanic with a net worth of only $200,000 trying to buy a $3 million apartment building?  Kill the deal.  Remember, the Net-Worth-to-Loan-Size Ratio says that the net worth of the borrower should be at least as large as the loan amount.

"But George, what if I don't have a single deal in processing?"  Then spend every possible minute calling, writing, or visiting nearby bankers and commercial real estate brokers.  Write newsletters and get them out.  Go to mixers.  Schmooze.  Do not - do not - waste your precious working hours trying to place pipe dream deals.

It is far better to turn away one deal in forty that might possibly have been do-able than to waste precious marketing time trying to pull off a miracle on 39 other goofy loans.  Your policy should be, "If a deal is not obviously a winner, I'm turning it down and working on my marketing."

Free Commercial Loan Software:

C-Loans has just developed some brand new commercial loan software that is super-easy to use, even for a complete newbie to commercial real estate finance.  You just fill in the blanks.  You can then take your professional-looking commercial loan package and submit it to any lender in the country.  This new software is also 100% free.

Still Trading Training Courses For Bankers:

If you haven't visited C-Loans.com recently, you will be shocked by the number of new banks and credit unions to whom you can easily submit your deal.  We have added hundreds of new banks recently.

Ever wished you could afford my nine-hour video training course, How to Broker Commercial Loans?  It is now online.  If you get me 20 commercial real estate loan officers working at a bank or credit union, I'll give you a copy for free.  (They each have to work at a different bank.)

You can use this course again and again to train new loan officers.  The most successful commercial mortgage broker in the country, Les Agisim of Trevor Cole Commercial, has used my course to train at least thirty of his loan officers.  By the way, Les has closed 55 commercial loans using C-Loans, thereby earning on the order of $1 million in commercial loan fees.

Here is how to get your free 9-hour commercial training course. You will be soooo much more confident about commercial real estate finance ("CREF") once you know what the heck you are doing.

"But George, I Only Know One or Two Bankers Making Commercial Loans."

What if you only know one or two bankers making commercial real estate loans?  You can trade one banker for your choice of (1) a Commercial Mortgage Marketing Course (the PDF); (2) an Income Property Underwriting Manual; (3) a Mortgage Broker Fee Agreement, prepared by an attorney; and (4) a regional copy of The Blackburne List, a list of 750 commercial lenders in your area.

You Get Two Free Training Courses or Tools, Just For Submitting a Commercial Loan Into C-Loans:

Once you enter a new commercial loan into the SIX-STEP C-Loans System (you actually checked off six banks and pressed "Submit"), simply send an email to Tom Blackburne at tommy@blackburne.com and say, "I submitted a commercial loan using C-Loans.com".  He will send you your two free training courses.  You get to choose from the list above.  Helluva deal.

Are You a Top-Tier Commercial Mortgage Banker?

For those of you who are really smart, C-Loans will pay you 20% of our net software licensing fee for convincing a bank or credit union to join C-Loans.com.  One smart mortgage broker, Arnold Taylor, has added 145 banks to C-Loans so far.  As his deals progress towards closing, he is going to make a fortune.

It's far easier than you think to convince a bank to join C-Loans.com.  Just call or email the commercial real estate loan officer, working at a bank or credit union, and say, "Do you want to close more commercial real estate loans?  You ought to join C-Loans.com as a lender."

"There is no cost to join, and there is no monthly fee.  You simply pay them a 37.5 bps. software licensing fee when the deal closes.  Most banks just bump their normal loan fee up from 1 point to 1.375 points to cover the cost of receiving their online commercial loan applications.  On deals over $5 million, their fee drops to just 25 bps."

"This commercial loan portal has more than 750 participating banks, they have been up now for 20 years, and they have closed over 1,000 commercial real estate loans.  There is nothing to sign.  Just complete this form to tell them your Commercial Lending Preferences."

Heck, you can just cut and paste these last three paragraphs and send them to your loan officer. Don't worry about closing the sale.  Just send us his contact information, including your loan officer's address and email address.  We'll then dangle delicious commercial loans in front of him until he joins.

It would be even better if you can gather from him the size and types of commercial real estate loans that he is seeking first, before even telling him about C-Loans. This way, when we dangle candy in front of him, it will be the type of candy that he really craves.  The good news is that most banks across the country are ravenous for commercial loans right now because commercial loans are so high-yielding.

Here is more information about convincing banks to join C-Loans.com.

First, just a quick reminder that C-Loans.com is now giving away free commercial loan software.  Now on to today's subject:

I read a very disturbing article this morning in a military journal about the Iranian drone and missile attack this week on that Saudi oil distribution facility.  The author pointed out that our advanced missile and drone radar detection system completely missed the attack!  The Iranian drones and missiles flew right through our radar detection fields, and we did not pick them up.

The Iranians have in their arsenal high-speed surface-to-ship missiles that can fly 40 miles per minute.  Our carrier fleet in the Persian Gulf is ... just 40 miles away.  Even if we could detect these incoming missiles, we would only have about one minute to react.

Folks, the U.S. Navy is in trouble.  Lockheed announced today that it is opening a hypersonic, long-range missile manufacturing facility in Alabama.  That's great and everything; but the Russians and the Chinese have been devoting a huge percentage of their military budgets to missile development for more than a decade.

Although it clearly has bugs (a Russian nuclear-powered test missile went off-course this month and blew up during recovery from the White Sea), the Russians are close to developing a hypersonic, nuclear-powered missile with an unlimited range.  This means that those of you close to military bases or chip manufacturing plants in Arkansas will soon not even be safe.

Now available online.  You gotta take this course!

Folks, the U.S. is woefully far behind in missile warfare.  Remember, no nukes will be used in World War III.  If any country ever used nukes, it would be answered with nukes.  Depending on the size of the exchange, the resulting nuclear winter could easily exterminate virtually all advanced lifeforms on earth.  Experts have said that a nuclear exchange between just Pakistan and India would produce a nuclear winter so horrific that it would result in the starvation deaths of two billion people.

A sizable nuclear exchange between the US and Russia or between the US and China would be roughly similar to that asteroid strike in Mexico (known as the Cretaceous–Paleogene extinction event) which resulted in the sudden, mass extinction of some three-quarters of the plant and animal species on Earth, approximately 66 million years ago.  Sunlight was largely blocked out for decades.

The fact that World War III will be fought without nukes means that one side or the other could actually win the war. 

To me, this is incredibly terrifying.  Mutual Assured Destruction no longer seems to be a deterrent.  As Richie Cunningham (Opie) might have said on Happy Days, "You're never going to use your nukes, Bucko, so we're coming at you with conventional weapons."

This month the Russians and Chinese plan to conduct an enormous joint land warfare exercise involving more than one-hundred thousand soldiers.  The Winds of War are blowing, folks, and America is on the dinner menu.  (I know, I know, I just mixed metaphors. Haha!)

The emergence of missile warfare reminds me a lot of the emergence of the longbow in the Middle Ages.  Until the Battle of Crecy in 1346, outside of Paris, the mounted knight was the master of the battlefield.  These immensely-muscular and fit knights would practice for two hours per day, easily swinging heavy swords that most layman could barely lift.  When you gave them armor and an armored horse, these monsters were almost unstoppable.  They were the main battle tanks of their day.

Get tons of commercial loans for less than the cost of two cups of coffee.

King Richard the Lionhearted, 6 feet 5 inches tall, was one such beast.  Ambushed and greatly outnumbered in 1162, at the Battle of Jerusalem, Richard rallied his disordered troops and personally led a counter-attack.  No one could stand in front of him.  King Richard was simply unstoppable.  The enemy was routed, and Jerusalem was recaptured.

In 1461, at the Battle of Towton (the bloodiest battle ever on British soil), King Edward IV - another armored giant - took a position at the head of an unstoppable wedge of knights to rout, and then to slaughter, the Lancastrian army, even though the Yorkists were outnumbered two-to-one.  The Lancastrian longbow men were out of arrows, and King Edward was personally unstoppable.  By the way, the book, Game of Thrones, was based on the War of the Roses in Britain.

The Battle of Crecy changed the age of the offense to the age of defense.  Until this battle, charging knights ruled the battlefield.  At Crecy, a tiny English army (14,000 men) took refuge on a hill.  The English created trenches and horse defenses, and stood behind them with their 5,000 longbow men.  After the longbow men routed the French crossbow men, on the order of 100,000 French mounted knights and men-at-arms repeatedly charged up the hill.  

Using arrows with bodkin heads, which easily penetrated armor, the English archers slaughtered the charging knights.  So many knights were killed that it has been said that the French lost the cream of their nobility.  It ended the Age of Chivalry - the age of the knights.  The Battle of Crecy also marked the end of the advantage then enjoyed by the offense in warfare.

The development of cannon and Hitler's blitzkriegs marked the return of the advantage to the offense.  Cannon had a longer range than the longbow.  Castles could no longer stand before an artillery barrage.  Hitler's tanks and dive bombers crushed the French army.  With the rise of aircraft carriers and air power, that offensive advantage in warfare has remained... until now.

I greatly fear, however, that the military advantage is once again swinging in favor of the defense.  How can our carriers approach and destroy targets in China, or even in Iran, when their long range missiles can sink a carrier from hundreds of miles away.

If your kid simply must join the military, don't have him join the Navy or the Marines.  The U.S. Navy is in trouble.

If you need a commercial loan, don't forget to enter your loan request into C-Loans.com.  We have been adding new banks like crazy, and you get TWO free training courses, just for entering a new commercial loan into C-Loans.com.  

Once you enter a new commercial loan into the SIX-STEP C-Loans System (you actually checked off six banks and pressed "Submit"), simply send an email to Tom Blackburne at tommy@blackburne.com and say, "I submitted a commercial loan using C-Loans.com".  He will send you your two free training courses.  Helluva deal.

But guys, filling out a freebie form to get a freebie does NOT constitute entering a commercial loan into C-Loans.com.  For example, filling out the form below does NOT constitute completing a C-Loans app.

Working on a construction loan?  Is your construction lender
demanding that your client come up with more equity?

To actually enter a commercial loan into C-Loans, you first have to register and hit a button that says, Step 1 of 6.  Later you get to add pictures.  Guys, always try to add pictures to your commercial loan applications.  Pictures are not required to use C-Loans, but they triple your chances of closing the deal and getting paid.  Here's an easy way to get pictures. 

Ever wished you could afford my nine-hour video training course, How to Broker Commercial Loans?  It is now online.  If you get me 20 commercial real estate loan officers working at a bank or credit union, I'll give you a copy for free.  (They each have to work at a different bank.)

You can use this course again and again to train new loan officers.  The most successful commercial mortgage broker in the country, Les Agisim of Trevor Cole Commercial, has used my course to train at least thirty of his loan officers.  By the way, Les has closed 55 commercial loans using C-Loans, thereby earning on the order of $1 million in commercial loan fees.

Here is how to get your free 9-hour commercial training course.   You will be soooo much more confident about commercial real estate finance ("CREF") once you know what the heck you are doing.

What if you only know one or two bankers making commercial real estate loans?  You can trade one banker for your choice of (1) a Commercial Mortgage Marketing Course (the PDF); (2) an Income Property Underwriting Manual; (3) a Mortgage Broker Fee Agreement, prepared by an attorney; and (4) a regional copy of The Blackburne List, a list of 750 commercial lenders in your area.

Lastly, for those of you who are really smart, C-Loans will pay you 20% of our net software licensing fee for convincing a bank or credit union to join C-Loans.com.  One smart mortgage broker, Arnold Taylor, has added 145 banks to C-Loans so far.  As his deals progress towards closing, he is going to make a fortune.

It's far easier than you think to convince a bank to join C-Loans.com.  Just call or email the commercial real estate loan officer, working at a bank or credit union, and say, "Do you want to close more commercial real estate loans?  You ought to join C-Loans.com as a lender."

"There is no cost to join, and there is no monthly fee.  You simply pay them a 37.5 bps. software licensing fee when the deal closes.  Most banks just bump their normal loan fee up from 1 point to 1.375 points to cover the cost of receiving their online commercial loan applications.  On deals over $5 million, their fee drops to just 25 bps."

"This commercial loan portal has more than 750 participating banks, they have been up now for 20 years, and they have closed over 1,000 commercial real estate loans.  There is nothing to sign.  Just complete this form to tell them your Commercial Lending Preferences."

Heck, you can just cut and paste these last three paragraphs and send them to your loan officer.  Don't worry about closing the sale.  Just send us his contact information, including your loan officer's address and email address.  We'll then dangle delicious commercial loans in front of him until he joins.

It would be even better if you can gather from him the size and types of commercial real estate loans that he is seeking first, before even telling him about C-Loans.  This way, when we dangle candy in front of him, it will be the type of candy that he really craves.  The good news is that most banks across the country are ravenous for commercial loans right now because commercial loans are so high-yielding.

Here is more information about convincing banks to join C-Loans.com.