Commercial Loans and Fun Blog

There is one advantage to being dull and thick-headed like me.  My disability forces me to learn advanced financial subjects in very simple terms.  Now let's tackle the concept of Net Worth in laymen's language (baby language).

So mean.

In simple terms, your Net Worth is the cash you would hold if you sold off - you liquidated - everything that you owned and paid off all of your debt. 

For a great many Americans, that number is a negative number; i.e., they owe more than what all of their assets combined are worth.  Obviously, banks don't rush to make loans to people with a negative net worth.

Here's a good rule of thumb.  Banks will seldom make a loan larger than a borrower's net worth.  If your borrower has a $500,000 net worth, the largest bank loan for which he might qualify is usually less than $500,000. 

Residential mortgage loans are an exception to this rule.  First mortgages on homes, where the borrower has demonstrated the ability to afford the payments (think of a physician just two years out of medical school with no assets but an increasing salary) are very desirable assets for banks.  These residential mortgages are very liquid assets; i.e., they can be quickly be sold off to another bank for cash.

As the owner of C-Loans.com, the commercial mortgage portal, I often hear mortgage brokers grumbling, "C-Loans doesn't work.  I submitted my $3 million commercial loan to 18 banks, and not one of them responded."

When I look up their deal, almost invariably their borrower - the one trying to borrow $3 million - has a net worth of just $250,000.  Hellooo?  To successfully borrow $3 million from a bank, you need a net worth of at least $3 million.

If you hooked my precious parts up to electrodes
and asked me, "Is this a good investment?"
I would passionately answer, "Oh Heavens, Yes!"

Do this!  Learn the profession!

I used a fancy finance term earlier - liquidate.  To liquidate an asset means to convert it to cash, the most liquid of all assets.  

When banks seize the assets of a delinquent borrower and liquidate them, it means they sell off the assets to some used furniture broker or used car dealer.  You never want a bank to liquidate your assets.  They sell off your assets in a hurry for pennies on the dollar.  Your new Play Station 5, for which you just paid $500, might fetch a lousy $55; and that $55 must be used to pay down your impossible debt. 

Let's get back to net worth.  How does a banker know your net worth?  He makes you complete a financial statement.  A Financial Statement consists of two documents - a Balance Sheet and a Profit and Loss Statement.

I belly-laugh every time I read the above meme.

How many times have you said, "This lender is an idiot."

Your net worth appears at the bottom of your Balance Sheet.  Your Balance Sheet starts with your Liquid Assets - like cash, marketable securities (stocks), bonds, and the cash value of your life insurance policy.  Added to that are your Fixed Assets - like your house, your real estate, your cars, your company, your 401k, and your profit sharing plan.

Combined your Liquid Assets and your Fixed Assets give you your Total Assets.

On the right side of the Balance Sheet are your Liabilities.

Oh, Heavens, if my wife sees this...

STOP!

Remember, we are trying to determine your Net Worth - the value of your Total Assets minus all of your debts.

Okay, now back to the right side of your Balance Sheet, where all of your debts are listed.  We have your Personal Loans, your Credit Cards, your Auto Loans, and finally your Mortgages.

How about a first aid kit for his cut feet?

Combined, we have your Total Liabilities.  When we subtract your Total Liabilities from your Net Assets, we have -

1.  Your Current Ratio
2.  Your Quick Ratio
3.  Your Net Worth; or 
4.  Your Liquidation Value

Cue the Jeopardy tune...

...

...

...

...

Right Answer:  Your Net Worth

Dear Readers:  The marketing suggestions that I will describe below will work for any industry which sells or provides services nationwide (lumber, women's shoes, etc.).  You don't have to be in the commercial loan business.

Below is a recent social media post of mine that was effective:

I make my social media posts on LinkedIn, Facebook, and X  - all of which are free.  I really like "free."  Between my staff of six active staff members, we have combined about 9,000 contacts who see our posts.

I post to social media twice a day, typically a joke or a meme in the morning and a more serious post in the afternoon.  That's 18,000 free touches per day (2 x 9,000).

Social media typically generates two new commercial loan leads for us every day.  And remember, social media is free!!!

Here is an example of a joke that I posted this week:

The format of my social media posts is always the same - a joke or factoid at the top, which rewards our readers for reading our posts, followed by a brief word from our sponsor.  

For example, if I was looking for commercial loan leads that day, I might write, after the joke, "Blackburne & Sons is looking for small, remote, or unusual commercial loans."  Then I would post a link to a landing page.

Here is the landing page I use for commercial loans: https://www.blackburneandsons.com/real-estate-loans/

"But George, I don't know any jokes."  Go onto Google and search for free joke newsletters.  Your friends tell you new jokes several times per day.  Write them down quickly in your phone.  Your daily "joke" might even be a nice story.  Your joke or story merely needs to provide a little joy.  It doesn't have to be perfect.

"But George, where will I get the factoids?"  Read X daily and seize on the any story that might be of interest to your readers.  Once again, write down the new factoid quickly in your phone.

"Where do I get the images?"  Just make them using AI.  Your AI tool will have a text field.  Simply write, "An exasperated wife stares at her husband in frustration, while he sheepishly avoids her gaze."  Press the Generate button, and within a minute, "Voila!"

"But George, I don't know a lot of people."  I started building my social media base less than two years ago.  Today, I am up to 4,700 friends.  I simply send out 15 or so invites per day.  LinkedIn makes it easy.

Marketing is a numbers game.  You have to keep your name and contact information in front of as many people as possible.

There is good news coming, so don't go out and kill yourself. [Chuckle]

If the U.S. and China go to war, your life will become hell.  You will mourn, along with your neighbors who had children in the Navy, the loss of 10,000 sons and daughters when the Chinese use their hypersonic missiles to sink at least two of our carriers and dozens of our smaller warships.

Your combined income tax rate will probably increase by 15% (from 30% to 45%), as the Federal government struggles to replace the 40 warships it lost in the opening hours of the war.

You will be lucky to keep your job.  Unemployment could easily soar to 20%, as worried and/or broke U.S. consumers stop buying.  If you do keep your job, you will definitely NOT be getting a raise.

After the first ten days of the war, the average American will finally understand our massive shortage of missiles, as our carriers, warships, and marines are forced to retreat across the map.  We can't replace these missiles because we lack the rare earth magnets needed to make them.

The cost of imports will skyrocket.  Everything will cost dramatically more.  The Dollar Store will become the Five Dollar Store.  Inflation might reach 20%.

Foreign investors will flood out of Treasury bonds, as there is a genuine risk of default.  We could easily lose a war with China.  Real estate will fall by 45%, between an initial 25% plunge, followed by a second, more prolonged 20% decline.  Once Hawaii has fallen, West Coast real estate will be in easy range of Chinese ship-mounted missiles.   

Interest rates will skyrocket.  Thirty-year Treasuries will probably soar to 12%.  Mortgage rates will be in the 14% range.  Loan-to-value ratios will plunge to 60%.  It almost won't matter.  No one will be buying houses or refinancing their sub-5% mortgages.

My wife keeps duct tape
handy to use on me.

Life is going to suck.

Now the Good News:

Xi Jinping, the President of China, the head of the CCP, and the Chairman of the Chinese Central Military Commission has effectively been deposed.

Right before the Fourth Plenum, Xi's rival and current head of the PLA, Zhang Youxia, deposed the nine highest ranking generals and admirals loyal to Xi.  By the end of the Fourth Plenum, Xi Jinping had been stripped of his power, but not his titles.

The CCP's elders realize that China's economy is a disaster.  By shooting off his mouth and announcing his intention to go to war in 2027, Xi scared foreign investors into fleeing China, with their money.  Near-shoring and friend-shoring are now all the rage.

The consumer market in China also clammed up, as terrified Chinese citizens started hoarding their cash.  We have all heard of the empty Chinese malls and restaurants.  Everyone is hoarding cash for the war.

Fortunately, the party elders have reined in Xi.  Right now he is just a figurehead.  However, if Xi can provoke a war, he will be catapulted back into power.  Anyone resisting Xi's reinstatement as head of the military will be deemed a traitor.  "Rally around the flag, Boys!"

It reminds me of that scene in Braveheart, when the nobility of both sides were meeting for a parley before the Battle of Stirling Bridge.  When his men asked William Wallace (Mel Gibson), "Where are you going?" Braveheart replied, "I'm going to pick a fight." 

Right now Xi Jinping is sending his Naval and Merchant Marine cronies to pick a fight with the Filipinos, the Japanese, or the Taiwanese.  We are definitely not out of the woods yet.

I will explain why you should care.

Xi Jinping desperately wants the Chinese money supply to grow.  He needs private companies to borrow, invest, and spend.  The loan proceeds that are spent - perhaps in payment to the guy that makes rear blinkers for electric cars - end up in the next bank. 

The next bank keeps, say, 5% in reserve and lends out the rest - perhaps to the glass maker.  The next borrower pays its own suppliers - perhaps to the trucking company.  And so on, until that first loan creates twenty times as much new money.  This is the multiplier effect.  This is how new money is created in China, just like in the U.S.  

But here is where everything falls apart.  Suppose businesses are terrified of a pending war.  Xi Jinping has already announced that China is attacking Taiwan in the Spring of 2027, when the tides are right.

Why would a Chinese factory owner want to be deep in debt right before a major war?  Therefore, very few factory owners are borrowing right now.  Everyone is hoarding cash and battening down the hatches.

Now the scary stuff.

Did you know that the multiplier effect works in reverse?  If a bank takes in a loan payment but can't find a new borrower to borrow the money, twenty times as money is destroyed!  Destroyed.  Puff.  Burned to cinders.

It has to do with the fact that the first bank to make the payment above suddenly has less deposits on hand.  Remember, our original borrower withdrew money to make the payment.  In order to maintain its proper banking ratios, the paying bank must reduce the size of its loan portfolio.  

The easiest way to think of what happens next is that the paying bank must then call an outstanding loan.  (It actually just takes in some payments and doesn't re-loan that incoming dough.)  Some other borrower then has to reduce his bank balance and pay off the called loan. 

The third bank suddenly finds its deposit balance lower and calls in some more loans of its own.  And this continues until -

If a borrower in China makes a $100 loan payment, and the receiving bank does not immediately lend that $100 back out (perhaps because no company in China wants to borrow), a total of $2,000 - TWENTY TIMES larger - is sucked out the Chinese money supply. 

This is the Reverse Multiplier Effect - the multiplier effect working in reverse.  The reverse multiplier effect causes massive deflation, and its why interest rates in Switzerland, Germany, and Japan dropped below zero in 2008.

Once deflation takes hold, its hard to stop.  Why buy a car or house today when prices will only be lower next year.  Business activity and consumer spending dry up.  Workers get laid off.  Factories close.  More workers get laid off.  

Deflation in China will soon spread worldwide, as China imports less coal, oil, cooper, cattle, feedstock, and soybeans.  Soon the whole world will be feeling the pinch.  No one has any money anymore because its getting destroyed by the truckload daily in China.

Skeptical?  Banks in China have resorted to calling their best borrowers and begging them to borrow.  "Look, please-please borrow 30 million yen.  We will put the proceeds in an account at the bank, and you don't have to use it.  There will be ZERO interest and no fees.  Thirty days from now, simply pay off the loan.  This will keep Xi Jinping off our (butt).  We will have met our lending quota."

Folks, have you started to notice that no one has any money?  Money is drying up worldwide.  No one has any money.  U.S. banks are in a huge liquidity squeeze.  U.S. banks are borrowing vast sums for the Fed.

No one has any money.  Did I mention that no one has any money?

It really frustrates China that the world conducts so much of its trade in U.S. dollars.  The China are desperately trying to create an alternative currency backed partially by gold and much more by the Chinese yuan.

The Chinese have been buying up huge reserves of gold and silver, which has driven the price of gold over $4,000 per ounce and the the price of silver almost to $50.  

Then the Chinese created huge depositories where holders of their new currency will be able to exchange it for physical gold and paper yuan.  Their scheme won't work because no one trusts the Chinese.

Although Xi Jinping has been largely muzzled, he is still trying to get back into power.  If Xi can start a war, his political opponents must back him.  Otherwise, they would appear like traitors.

Japan has a beautiful new Prime Minister, Sanae Takaichi, who is very much a hawk and pro-Taiwan.  "A Taiwan contingency is a Japanese contingency," she said, emphasizing Taiwan's proximity (just 110 km from Japan's Yonaguni Island) and its role in vital sea lanes for Japan's energy imports.

China was pissed.  Xue Jian, China's Consul General in Osaka, issued a social media post, in which threatened to cut off the neck of the lovely Mrs. Takaichi.  Holy poop.  Imagine if Marco Rubio, our Secretary of State, threatened to shoot Xi Jinping in the groin?  The threatening social media post has NOT been retracted.

 

Have you ever heard of the “Universe 25" Experiment?  It’s chillingly similar to today’s Western Society.  

In 1958, Dr. John Calhoun built a perfect utopia for mice - with unlimited food, entertainment, shelter, and no predators.  

The mice had everything they needed to thrive, but around Day 317, something went horribly wrong.  The social structure began to break down. 

Dominant males became aggressive and attacked others randomly.  Some females became violent against their young. 

Meanwhile, a group of males withdrew completely.  They stopped fighting, mating and interacting.  Calhoun called them, “The Beautiful Ones”.  

As these passive males increased,  birth rates collapsed, infant mortality rose to 100%, sexual behavior broke down, and pathological violence and cannibalism appeared, until every mouse died. 

Calhoun repeated the process 25 times.  Each time the ending was the same. 

The conclusion was disturbing:

When a population no longer needs to struggle for survival and no meaningful roles exist… social and behavioral collapse becomes inevitable.  

Universe 25 wasn’t about mice.  It was a warning.

This rare earths embargo is getting serious.  This morning, I read that two Volkswagon EV factories in Europe were temporarily idled in late 2025 because of a shortage of the AP550 electric motor, a part that relies on rare-earth magnets.

This Chinese "embargo" did NOT just come out the blue.  Here's the story from an X post by Zhao DaShuai, a Chinese socialist influencer and a member of the People’s Armed Police Propaganda Bureau (so she is obviously biased in favor of the Chinese):

Oooo, I'm really asking for it now.  Haha!

Zhao posted, "From a reliable source, on why Scott Bessent has a grudge against Li Chenggang:

During the negotiation in Spain, the US delegation threatened more semiconductor control measures against China.

Li Chenggang then picked up the phone and ordered the anti-monopoly investigation against Nvidia during the meeting, right in front of Scott Bessent's face. (George: Wow, this Chinese guy was not messing about.)

Sorry for the naughty word [Shame]

On the issue of US threatening to impose docking fees on ships built in China; we (the Chinese negotiators) told the US delegation, that we will impose crippling rare earth export control bans if they go through with it.

Bessent didn't believe the warning, he didn't even fully convey our (the Chinese) position on this matter to Trump, which is why Trump was so blindsided when the rare earth export control went into effect, claiming in his Truth Social post that, "It came out of nowhere."

It's obvious Trump would be angry at Bessent, who then needs to blame someone on the Chinese side - Li Chenggang who basically slapped Bessent in the face - is the obvious target."

Scott Bessent complained about Li Chenggang to the Chinese authorities and publicly called him "unhinged."  The outspoken trade negotiator, Li Chenggang, was dismissed as the country’s representative to the World Trade Organization.

But here's the deal:  The Chinese "embargo" on rare earths sales remains!

I don't think most people appreciate the devastating effect America' massive new docking fee is having on the Chinese ship building industry.

Just this week, Greek shipping magnate, Maria Angelicoussis, cancelled two Suezmax ship orders with China and moved them to South Korea.  No shipping concern today want to risk buying $85 million Chinese ships that could - because they were built in China - be sanctioned with impossible docking fees.

The Chinese are pissed.  Shipping has a been a HUGE industry for China.  This rare earths "embargo" might not go away easily. 

The folks on the news never talk about why World War II started.  In early 1941, the U.S. and the Dutch suddenly stopped selling oil to Japan.  At the time, Japan was at war with China, and they were desperate for Indonesian oil. 

The Japanese knew if they invaded Indonesia to seize their oil that the U.S. would declare war on them.  If they had to fight the U.S., the Japanese might as well land the first blow at Pearl Harbor. 

Francisca, my beautiful, exotic wife of 43 years is Dutch Indonesian.  Her dad married a pretty Indonesian girl.  In 1941, Cisca's grandfather was the highest ranking Shell Oil executive in Indonesia.  When the Japanese stormed the beaches of Indonesia, Cisca's grandfather ordered the destruction of all of Shell's oil wells.

When the Japanese found the wells burning, they were pissed.  They loaded Cisca's grandfather onto a truck, which headed out into the jungle.  He was never seen again. 

The Chinese Communist Party ("CCP") won't allow an economic depression.  They don't dare.  As a result, they are screwed.

The CCP has a contract with the Chinese people.  The people gave up their freedom of speech, their freedom of movement, and the right to choose their own political system.

In return, the CCP promised to improve the economic lives of the Chinese people every year.  For decades, the CCP delivered on this contract.  The economic lives of the Chinese people has improved considerably.

Great recessions, like forest fires, are necessary for an economy's long-term economic growth. Great recessions clear out the financial deadwood - zombie companies, over-leveraged companies, and inefficient ones.

A zombie company is an unprofitable business that generates just enough revenue to cover its operating expenses and interest payments but lacks the funds to invest in growth, innovation, or pay down its principal debt.

Zombie companies, often burdened by debt, rely on continued borrowing and external financing from banks or investors to remain in business. They are characterized by financial weakness, stagnant operations, and poor long-term prospects, posing a risk to the economy by consuming resources that could be used by healthier firms. 

A great many Chinese companies are now zombies; but the CCP won't allow these companies to fail because they provide employment to tens (hundreds?) of millions of workers.

In a great recession, these laid-off people would almost certainly riot. They already resent and hate the CCP.  All it would take would be a spark to send millions of furious protestors into the streets and over the walls of Zhongnanhai.

Zhongnanhai (Joe-nan-hai) is the central headquarters for the Chinese Communist Party and the State Council. It is a walled imperial garden where China's top leaders, including the General Secretary, conduct their daily official duties. It also serves as the official residence of some of the highest members of the CCP.

So China is doomed to an ever-falling GDP and stagnant corporate innovation.  The CCP will need to fall before the financial logjam can ever be cleared.