Commercial Loans and Fun Blog

Are any of you guys savvy stock pickers?  If so, you might want to consider shorting those companies which provide services to the construction industry.  For example, those companies that manufacture, deliver, and/or set up huge construction cranes are likely to face some tough years ahead.

Why?  There may be very little new commercial construction - apartments, office buildings, shopping centers, residential subdivisions - over the next three years.

The reason why is because the banks have stopped making new commercial construction loans.  Banks are terrified right now, and the first thing that banks do when they get scared is to stop all commercial real estate lending.  

This lending freeze is especially true of commercial construction loans.  I have lived through three commercial real estate crashes in my forty years in commercial real estate finance ("CREF") - the S&L Crisis, the Dot-Com Meltdown, and the Great Recession.  Each time commercial real estate declined by almost exactly 45%.  Remember that number - 45%.  Commercial real estate may decline by 45% again as a result of this Coronavirus Crisis.*

It's almost like a game of musical chairs.  Whichever banks are caught with construction loans outstanding are the ones that take the largest losses during the commercial real estate crashes that seem to happen about once every twelve years.

Eeeuuu!

Short, funny alligator video.

It is important to grasp the concept that local commercial banks make 95% of all commercial construction loans.  Construction loans are are funded gradually, as the work progresses.  If you just gave a developer $5 million to build an apartment building, he's likely to skip the country, along with Lola La Boom-Boom, to some sunny beach to South America.

Because Lola looks awfully good in a string bikini, we simply cannot trust Don Developer with all of the money at once.  Instead, the proceeds of the construction loan are paid directly to Don's subcontractors, and they are paid only after the subcontractors have correctly completed their work.  The bank has to sign off on this work too, after it has made a progress inspection.  A progress inspection is a quick inspection by a bank employee to verify that certain construction work has been properly completed.

Every ten or fifteen days the bank has to send a loan officer out to the construction site to take a look at the progress of construction.  The subcontractors will be clamoring to get paid.  Some huge New York bank, for example, couldn't possibly fly a loan officer all the way out to Phoenix every two weeks to make these inspections.  This is why commercial construction loans are almost always made by local banks.

"But George, if the banks are too scared to make construction loans right now, why can't some other type of enterprising commercial lender start making them?"

There are several problems with this.  First of all, banks offer construction loans at rates as low as 4.25%.  I actually had to look up the current rate on commercial construction loans for this blog article, and do you know where I went?  I actually went to our new Commercial Loan Resource Center, which always shows you the latest interest rates on commercial real estate loans.  Haha!  If you have not checked out our new Commercial Loan Resource Center, you are really missing out.  Totally free.

A competing commercial real estate lender (private money lender) might have to charge 8% to 11% for a construction loan, and that higher interest cost would cut deeply into the developer's profit.  An extra 4% interest on a $5 million construction loan is real money.

12 seconds of hilarity

The second problem is that construction loans have to be disbursed as the work progresses.  That means that the lender has to sit on his dough, not earning any meaningful interest, until the developer is ready to draw down on his loan.  That's not very attractive for non-bank commercial lenders (think private money lenders).

The private money lender could fund the entire loan proceeds into a builder's control account and demand that the developer pay interest on the entire loan amount from Day 1; but this would be horribly expensive for the developer.  A builder's control account is an independent escrow set up to hold the proceeds of a construction loan until certain work is done.

The last problem with having a private money commercial lender make construction loans is that the lender will often be located too far away to make timely progress inspections.  Suppose the lender is based in San Diego and the project is located in Phoenix.  Progress inspections would be hard... but not impossible.

It has occurred to me that a great many developers across the country have started residential subdivisions, and they personally guaranteed their acquisition and development loans ("A&D").  They had their normal bank all primed to make the construction loan, once the horizontal improvements were in place.

An A&D loan is a loan to a developer to buy the land, to get it properly zoned, and to complete the horizontal improvements.  It's like a pre-construction loan.

Horizontal improvements including the clearing of the land, grading of the land, compacting the land, and installing streets, curbs, water, sewer, and power.

Now imagine you're a very good homebuilder, a responsible guy who tries not to use excessive debt or take too many chances.  You have successfully built out and sold off five previous residential subdivisions.  You have built up a respectable $7 million net worth.  You take out a $4 million A&D loan on your next subdivision.

Suddenly the Coronavirus Crisis hits, and the $4 million balloon payment on your A&D loan, which you have personally guaranteed, is due in just three more months.  Your bank notifies you that they will not be making any construction loans for the foreseeable future.  You contact two dozen other banks, and they all say the same thing.  "Quick, Jack, what do you do?"  (Famous movie line.  Can you name it?  Hint: The bad guy lost a finger defusing a bomb.)

I think there is a real opportunity for some mortgage funds, if any of them have survived, to fund the completion of this project for the developer and to charge him an equity kicker of an absolutely insane percentage (85%?) of the profits.  What choice does the developer have?  He personally guaranteed the A&D loan!  He simply must get out from under that personal guarantee.

An equity kicker is additional interest, in addition to the nominal interest rate, that takes the form of a share of the increased value of the property or a share of the profits upon sale.  A common equity kicker might be 10% to 30%.  The nominal interest rate is the interest rate stated or "named" on the note.  

Conclusion:

If your brother-in-law is a union carpenter, he would be smart to apply right now for a job delivering goods for Amazon or Wal-Mart.  His construction job is not coming back.  There will be very few commercial construction loans funded over the next three years, which translates to very few required construction jobs.

*President Trump and the Fed are determined not to let commercial real estate fall by 45% again, so they are using massive deficit spending and even more massive quantitative easing to keep the U.S. economy from deflating like a pierced balloon.  The problem is that China is not taking similar inflationary steps.  I fear a deflationary tidal wave coming from China later this year, and that wave will impair much of Trump's and the Fed's inflationary efforts.  I will blog on what this deflationary tidal wave might look like later in the week.

You will fall in love with wombats.

All of my readers should read today's article, including commercial loan brokers, commercial brokers, real estate investors, and developers.

A couple of years ago I wrote a superb article that explains the entire commercial construction loan underwriting process in layman's English.  I teach the reader the five ratio's of commercial construction loan underwriting, including

1. The Loan-to-Cost Ratio;
2. The Loan-to-Value Ratio;
3. The Debt Service Coverage Ratio;
4. The Profit Ratio; and 
5. The Net-Worth-to-Loan-Size Ratio

STOP!  Take 42 Seconds to View This Video.

Don't panic!  Don't fall asleep!  I make these ratios fun!

The article is written in a playful manner that I promise will have you chuckling.  We follow the story of Bubba, a developer of questionable morals, as he tries to convince his bank to make a construction loan to build an apartment building.

Prepare to learn more from this lesson than from any other training lesson that I have ever written:

https://www.c-loans.com/knowledge-base/underwriting-commercial-construction-loans

Suppose you're a commercial loan broker, and you have have four commercial loans in process.  Three of them are commercial construction loans.  The doctor says you're gonna die.  (Old joke about the snake venom and the need to suck it out.)

How come?  The banks are making commercial construction loans again, and banks close 95% of all commercial construction loans.  That sounds positive.  So why can't a commercial loan broker ever close a commercial construction loan?

Your chances of EVER closing an international commercial loan are definitely zero.  (I'll be blogging on international loans again in a few months.)  Your chances of closing a commercial construction loan are NOT zero; but your chances are very low.  Today's training will explain why.

Banks love-love-love to make good construction loans, assuming the developer enough equity in the deal.  (Aye, there's the rub.)  Assuming that the financial world is not melting down, it has always been easy for qualified developers to simply trot down to a local bank and get a construction loan.

As a result, only the unqualified developers ever called commercial mortgage brokers for a commercial construction loan of less than, say, $7 million.

One way a developer could be unqualified is because he has very little construction experience.  His CV is very unimpressive.  A CV stands for curriculum vitae, which, in practice, means his construction resume.  If a developer is seeking a commercial construction loan to build a 20-unit apartment complex, ideally this developer has already built a four-flex and then an eight-unit apartment building.

More commonly, a developer is unqualified because he can't contribute 30% to 35% of the total cost of the project in cash or in equity in his land.  In the past, banks usually only required the developer to contribute 20% of the total cost of a project.  Since the Great Recession, however, commercial banks will rarely be satisfied with the developer contributing less than 30% to 35% of the total cost of the project.  That's a whole lot of equity.

Twice in the preceding paragraph I have used the term of art, "total cost". The Total Cost of a commercial construction project is the sum of the Land Costs (usually the actual purchase price of the land), the Hard Costs (bricks and mortar), the Soft Costs (fees, reports, points, etc.), and the Contingency Reserve (5% of hard and soft costs).

As a commercial loan broker, you will find that 95% of your commercial construction loan applicants lack the required 30% to 35% equity.  In other words, your developer doesn't have enough skin in the deal.

If a developer was wealthy enough to contribute 30% to 35% of the total project cost in cash, you can bet that he has tons of contacts directly with banks.  He doesn't need you.

Therefore, if you want to feed your family, don't waste time working on commercial construction loans or residential subdivision construction loans right now.

Does this mean that there are absolutely no commercial construction loans that make sense?

No.  The deals that still make sense in today's market are the small commercial construction loans, made to owner-users, from SBA lenders, typically under the 504 Program.  You can apply to dozens of SBA 504 construction lenders using C-Loans.com.

How can you tell if a commercial construction loan request is dead on arrival?  The most common reason why a bank will reject a commercial construction loan is because the developer has not contributed enough equity.  Quick aside:  Ninety-nine percent of all commercial construction loans are made by banks.  What constitutes equity?  I recently wrote an excellent article on equity for development projects.

Here is a quick napkin test that will tell you whether or not you should waste your time working on a construction loan request.  Compute the Loan-to-Cost Ratio by simply dividing the Construction Loan Request by the Total Cost of the project.  The Loan-to-Cost Ratio must be 75% or less in the post-Great-Recession market.  Put another way, the developer must pay for at least 25% of the Total Cost.

Because I've been doing this for 37 years, I can compute a Loan-to-Cost Ratio in less than one minute; but maybe a quick review will be helpful for you. The Loan-to-Cost Ratio ("LTC") is defined as the Construction Loan amount divided by the Total Cost of the project (all multiplied by 100%).

Loan-to-Cost Ratio = Construction Loan / Total Cost

Historically banks were satisfied if the Loan-to-Cost Ratio was 80% or less.  In other words, banks were satisfied if the developer was paying 20% of the Total Cost.  That 20% of the Total Cost represented his equity or, in the parlance of commercial mortgage finance, his skin in the game.  Unfortunately after the huge losses suffered by banks in commercial construction lending during the Great Recession, most small banks today limit their loan-to-cost ratios to just 65% to 72%.

The big banks, when making the really large commercial construction loans ($20 million+), limit their loan-to-value ratios to just 55% to 60%.  Fifty-five percent???  Yup.  Ouch!  How can a developer come up with 45% of the Total Cost?  There is a type of equity called gap equity, that takes a developer from 55% LTC up to 80% LTC.  I hope to blog on the subject soon.

Now in order to compute your Loan-to-Cost Ratio, you will need to know the Total Cost. Total Cost is defined as the sum of the land cost, the hard costs, the soft costs, and the contingency reserve (5% of hard and soft costs).

Total Cost = Land Cost + Hard Costs + Soft Costs + Contingency Reserve

Most developers underestimate their Soft Costs.  The Soft Costs include such things as architectural fees, engineering fees, report fees (environmental impact reports, appraisals, toxic reports, geological reports, surveys, etc.), governmental fees (plan check fees, inspection report fees, sewer hook-up fees, etc.), bonding fees, title commitment fees, attorneys fees, loan fees, mortgage broker fees, and the interest reserve.  Everyone underestimates the interest reserve.   Soft costs usually range from 40% to 55% of hard costs.  If you don't trust the developer's soft costs, use at least 40% of the hard costs for soft costs.

The Contingency Reserve should be 5% of hard and soft costs.  Why not 5% of the Land Cost as well?  Most developers already know the exact cost of the land.  There is unlikely to be a cost overrun on the land.

Are you a wealthy developer or investor?  The sister company of C-Loans, Inc. is Blackburne & Sons Realty Capital Corporation.  We have been selling 8% to 12% first mortgage investments to wealthy private investors for 37 years.  We currently have around 1,500 private investors, and we are servicing a portfolio of over $50 million.  Due to a recent law change (JOBS Act), Blackburne & Sons can now accept investments from accredited investors (gotta be accredited) as small as $10,000 in each loan from anywhere in the country, not just California.

This is a family firm.  I'm George III, the founder and the dad.  I am a licensed attorney in both California and Indiana.  My sons, George IV (Ohio State) and Tom (Purdue), are both Eagle Scouts, as am I.  Cisca and I have been married for 34 years.  (My staff have nominated poor Cisca for sainthood.  Ha-ha!)  My point is that we are steady-eddie folks.

You should sit on our investor mailing list for a couple of years and then someday try us with a tiny investment (as small as $5,000 in your first deal) in one of our loans.  We are not a fund!  Hard money mortgage funds tend to (85% of the time) fold up with ugly consequences during bad recessions.  In contrast, if you invest with us you will actually own, say, 7%, of the first mortgage.  But you must be an accredited investor!

You need a commercial real estate loan, and you have diligently been doing your research.  Is it finally time to actually apply for that commercial loan?

For just $79.95 you can buy a recently updated list of over 2,500 commercial lenders.  If money is tight, you can buy a Regional List (750+), for the region that contains the property in question, for just $39.95.

Many commercial mortgage brokers are excellent salesmen, but they starve because they make a dozen preventable mistakes every single day.  This 5-hour course in the Practice of Commercial Mortgage Brokerage contains more than 60 practical lessons in commercial mortgage brokerage.  I consider it to be the crown jewel in my training series, the best of my life's work.  It is the only course I sell that comes with a 100% satisfaction guarantee.

Do you need a business loan secured by accounts receivable, inventory, or equipment.  Do you need a lease to acquire some piece of equipment?

We have a superb multifamily program with "A" quality rates for deals with a tiny black hair on them.

Blackburne & Sons, my own hard money shop, offers bridge loans for just 1 point.

Every commercial mortgage broker should use a fee agreement on every commercial loan.  Our agreement is quite short, and it is fair to both the borrower and the mortgage broker.  You commercial mortgage brokers will kick yourself when you lose a $20,000 fee.

Do you own a real estate or mortgage website?  By simply putting a "Commercial Loans" link to C-Loans.com on your web site, your web site can work day and night to generate referral fee income.  We once paid $21,250 to a guy named Alan Dunn.  Somebody came to his website, saw a "Commercial Financing" link, clicked on it, came to C-Loans.com, and then applied for $17 million loan.  Alan was asleep at the time!  (We actually have no way of knowing that, but Alan certainly could have been asleep, and it makes for a great story.  Ha-ha!) 

Have you tried our latest commercial mortgage portal?  CommercialMortgage.com has four times more lenders than C-Loans.com, and it is far easier to enter a deal.

Is it finally time to actually learn the profession that you practice?  Just sayin'...

Did you learn something today?  Get two free training lessons in commercial real estate finance every week.

Got a buddy or a co-worker who would benefit from free training in commercial real estate finance (CREF)?

I just completed a new training article on how commercial construction loans are underwritten.  It was the hardest subject that I have ever attempted because bankers use five different financial ratios when underwriting commercial construction loans.  The article took me two weeks to write.

If you are involved in commercial real estate construction, development, sales or finance, you will greatly benefit from mastering this subject.  The Loan-to-Cost Ratio, Total Construction Costs, Hard Costs, Soft Costs, Contingency Reserves, the Profit Ratio, and the Net-Worth-to-Loan-Size Ratio will suddenly because part of your daily lexicon.  After reading this article, commercial real estate finance will hold few remaining mysteries for you.

And folks, this stuff is not that hard.  If you paid attention in fifth grade math, you can master this stuff.  Prepare to be wowed.  Read this great article here:

http://www.c-loans.com/knowledge-base/underwriting-commercial-construction-loans

Keep looking for the business card or the contact information of any banker making commercial real estate loans.  We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders.

Have you registered on C-Loans (filling in your name and address) and gotten your free $199 commercial mortgage underwriting manual?

Do you sell commercial real estate?  If so, then by all means open a commercial mortgage company (a desk, a phone, and a body)!  Why?  Because there is no better way to meet high-net-worth individuals than to own a comemrcial mortgage company.  Poor people don't own $5 million shopping centers.

Do you need a commercial loan with no prepayment penalty? Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months? Do you need a lender who will allow a negative cash flow? Do you need a lender who will also look at the borrower's global income - income from salaries, other investments, etc.? Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national? Do you need a non-recourse loan?

Got a commercial mortgage deal that deserves a life company, conduit, or bank loan?

Did you learn something today?  Want to recieve two free training lessons in commercial real estate finance every week?

Got a buddy or a co-worker who would benefit from learning commercial real estate finance?

Developers, now is the time to apply for a commercial construction loan.  Mortgage brokers, now is the time to resume brokering commercial construction loans.  The economy is pretty healthy, and commercial banks are hungry to put their $2.7 trillion in excess reserves to work.  By the way, if you want a commercial construction loan, you will want to apply to a commercial bank, rather than to a mortgage company.  Commercial banks make 98% of all commercial construction loans.  However, developers, you need to have some skin in the game.

One of my commercial construction loan officers called me yesterday.  He had a developer who is building a $33 million apartment building in Florida.  The developer is buying the land for $2.7 million, and he has a term sheet for a purchase money first mortgage for $1.7 million.  He wanted a second mortgage on his purchase of the land for $800,000.  Who out there immediately spotted this as a goofy loan request?

A term sheet is defined as a loan proposal or conditional commitment letter (same thing) from a commercial real estate lender.  Appraisals and toxic reports are so expensive in commercial real estate finance that borrowers want at least a moral commitment from the bank before shelling out $4,500 to $8,000 for these third party reports.  A term sheet is legally worthless, but in real ife it means that the borrower is probably going to get the loan at the proposed terms, as long as the third party reports come back okay.

Now back to my story.  Why was this a goofy loan request?  Answer:

1. No one makes second mortgages on land (other than sellers carrying back part of the purchase price).
   
   
2. The bank is going to insist that the developer contribute at least 20% of the total cost of the project.  Normally - but not always - this means that the developer has to bring the land to closing table (almost) free and clear.  More on this below.

Before we go any further, let's define a few terms.  The Total Cost of a commercial construction project is defined as the sum of the land costs, the hard costs, the soft costs, and the contingency reserve (normally equal to 5% of hard and soft costs).

Total Cost = Land Cost + Hard Costs + Soft Costs + Contingency Reserve

The Loan-to-Cost Ratio is the most important ratio in commercial construction loan underwriting.  The Loan-to-Cost Ratio is defined as the Construction Loan Amount divided by the Total Cost, times 100%.

Loan-to-Cost Ratio = (Construction Loan Amount / Total Cost) x 100%

Example:  Let's suppose a developer wants to build a three-unit industrial center in Austin, Texas.  He needs a $3.2 million construction loan, and his total cost is $3.8 million.  What is his Loan-To-Cost Ratio?

Loan-to-Cost Ratio = ($3,200,000 / $3,800,000) x 100% = 84.2%

This ratio is too high.  Unless the developer can raise more equity, the loan will be turned down.

For most commercial construction lenders, the Loan-to-Cost Ratio must not exceed 80.0%.  In other words, the developer must cover at least 20% of the Total Cost of the project.  This kind of makes sense.  The bank doesn't want to take all of the risk.  The developer must stand to lose some serious dough if the project goes South.  The developer must have some skin in the game.

Okay, now let's go back to the goofy commercial construction loan request I cited at the very beginning of this training article.  You will recall that it was a $33 million apartment construction loan request.  Well, we know that the developer and his investors are probably going to be required to contribute 20% of the $33 million Total Cost; i.e., $6.6 million. 

Now the developer is buying the land for $2.7 million.  He has a term sheet for a $1.7 million new first mortgage, and on top of that, he wanted an $800,000 second mortgage.  In other words, he was only contributing a $200,000 downpayment on a $33 million project.  His Loan-to-Cost Ratio was 99.4%!  Somebody has been partaking of that Colorado medicinal tobacco.  Ha-ha!

Remember, most commercial construction lenders want the developer to bring the land to the deal free and clear, or at least pretty close to free and clear.  In most commercial construction deals, the land represents between 20% to 25% of the Total Cost, and that, along with architectural and engineering fees, is where most developers have spent their required equity.

Do you know a banker who is making commercial real estate loans?  We'll trade you the contents of one banker's business card for a list of 2,000 commercial real estate lenders.  We solicit these guys to refer their turndowns to C-Loans.

You are going to love me after this training article.  It's the best one I have ever written, and whether you are a developer or a commercial loan broker, this training is going to make you a ton of money.

Now is a terrific time to originate or obtain a commercial construction loan.  Its particularly easy right now to close deals for the reasons I will outline below.

In this blog article I will teach you exactly how to close a commercial construction loan.  I have assumed that you are complete rookie.  All you have to do is follow the precise steps enumerated below today's funny picture.

But first let me explain why it is so easy to close commercial construction loans right now.  First of all, there has been very little commercial construction for the last nine years.  The world needs new commercial buildings.  

In addition, banks are loaded to the gills with cash right now (almost $3 trillion in excess reserves at the Fed), and commercial construction loans are extremely profitable for the bank.  The bank earns its entire loan fee upfront, but it doesn't have to disburse most of it's loan proceeds for many months.  This supercharges the bank's yield.  Construction loans are also short term.  Banks love-love-love short term loans.

Bottom line:  In a healthy economic climate like today's, banks prefer construction loans to almost all other loan products.

For commercial loan brokers, commercial construction loans are large, therefore so are the loan fees.  And in particular right now, very few commercial loan brokers even know how to originate commercial construction loans.  Most of the experienced commercial loan brokers were either driven out of the business or retired during the Great Recession.  Commercial mortgage brokers:  You have very little competition.

Bottom line:  Commercial construction loans are not that hard for a commercial loan broker to originate.  Just follow the easy steps outlined below.

But how do you close a commercial construction loan?  Its easy.  Just follow these steps:

1. Start with a local bank.  Construction loans require progress inspections, so the lender needs to be located nearby.  You can find many hungry commercial construction lenders by using C-Loans.com, and C-Loans is free!
   
   
2. Choose your local bank by size.  Small banks (less than $1 billion in assets) make small commercial loans (less than $2 million).  Regional banks ($1B to $10B in assets) make medium-sized loans ($2MM to $8 million).  Money center banks (more than $10B in assets) make the commercial construction loans larger $8 million.
   
   
3. Gather a loan package:  Initially you will need the details on the land purchase - purchase price of the land, down payment, balance owing, value of the land today, and if the borrower claims that the land is worth more than the purchase price, a very convincing explanation of why this is so (the developer assembled three contiguous parcels over several years or he got the land re-zoned or Wal-Mart moved right next door).  You will need a construction cost breakdown, sales projections if this is a "for sale" property or a pro forma operating statement if this will be a rental property, a curriculum vitae or CV (building experience resume) on the developers, a financial statement on each of the developers, photo's of the land, and ideally an architect's rendering.  It's the rare project over $5 million that ever gets financed without an architect's rendering.
   
   
4. Run the deal by prospective lenders over the phone, keeping the identity of the developer and the exact location of the property close to your vest initially.  The first words out of your mouth should be, "Hello, Mr. Banker.  My name is John Jones with Jones Mortgage, and I'd like to run a deal by you.  Did I catch you at a good time?  If not, I'll be happy to call back later."
   
   
5. Some bankers are aggressive.  Some bankers are so"sleepy" as to make it almost a crime for them to collect a salary.  If one bank loan officer blows you off the phone, be sure to call back the next day and speak with a different loan officer at the same bank.  I have closed scores of loans in my time where Loan Officer A at Bank of the Neighborhood turned me down, but Loan Officer B at Bank of the 'Hood later said yes; but wait a day or two before you call the same bank back.
   
   
6. Once your borrower has sent you his initial package (the borrower needs to prove he is serious about this loan by putting in some sweat-effort), and once you have an interested lender lined up, its now time to ask your borrower to sign a Non-Circumvention Agreement.  Unless the developer intended to find out the name of your lender and then go behind your back, he should have no problem signing a short agreement protecting the mortgage broker.
   
   
7. Now its time to prepare your loan package.  Prepare an Executive Loan Summary, attach your pictures and the short stack of documents described above, and save it as a PDF.  Don't know how to create a PDF?  If you enter the loan into C-Loans.com and submit the deal to six commercial construction lenders, you can then - right as you leave C-Loans - press the Create a PDF button and save the PDF we create for you to your desktop.  One click.  Easy-peasy.
   
   
8. Submit your PDF to your interested lender by email.  He will not open it.  Whaaat?  You'll see.  He'll have some BS excuse (the dog ate Hillary's emails), but the truth is that bankers are incredibly... sleepy.  How about that for tact?
   
   
9. Therefore it is essential that you call your banker to confirm receipt of the package.  "Hi, Mr. Banker, John Jones here.  All I'm doing today is calling to confirm receipt of the package.  You did get it, right?  Oh, your email was down, but its up again now?  Great.  You'll read the package tonight?  Wonderful.  I really wasn't calling to bug you (yeah, right... and I'll love you in the morning).  I should call you tomorrow morning?  You got it!"
   
   
10. Don't worry if the banker nit-picks your deal and turns it down.  No problemo.  He is probably just lazy, or his bank has enough commercial construction loans right now.  If a banker really wants to make loans, a few black hairs is NOT going to put him off.
    
    
11. The secret to successful commercial loan placement is to just keep presenting the deal to different bank loan officers (they can even be at the same bank - see above) until you find one in the mood to lend.
    
    
12. Once the lender comes back and shows some serious interest, from there on its merely a matter of fetching and shuttling documents.
    
    
13. At some point in time the banker should issue a term sheet (also known as a conditional commitment letter or loan proposal), which outlines the likely terms of the proposed commercial construction loan and asks for a deposit of $3,000 to $8,000 for third party reports (appraisal, toxic report, title commitment, etc.).
    
    
14. Although a term sheet is NOT binding on the lender, in real life a term sheet means that you are almost certainly going to get the loan.  As long as the third party reports come back okay, you're golden.
    
    
15. That's it.  Easy-peasy.

Do you need a commercial construction loan right now?

Do you need a permanent loan, a takeout loan, a bridge loan, an SBA loan, a mezzanine loan, a nonprime/subprime commercial loan, or a hard money commercial loan?

Do you need a lender who will actually lend at 75% LTV, rather than just boast about it?  Do you need a lender who will allow a negative cash flow?  Do you need a lender who will also look at the borrower's global income - income from salaries, other investments, etc.? Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national? Do you need a non-recourse loan? Do you need a commercial loan with no prepayment penalty? Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months?

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