Commercial Loans and Fun Blog

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.

 

 

 

 

Before we get into today's commercial loan training lesson, I have an interesting story for you.  Yesterday a newbie commercial loan broker contacted me, and he said, "I desperately need your fee agreement for a deal that is close to closing, but I don't have a banker to trade."

I told him, "Just call your local bank and ask to speak with a commercial real estate loan officer.  Every bank has one.  Collect his address, phone, and email address, and voila, you're done!"  Twenty minutes later, he sent me my commercial loan officer and lived happily ever after.

You can trade a commercial real estate loan officer, working at a bank or a credit union (no other types of commercial lenders please), for your choice of (1) an Income Property Underwriting Manual; (2) a Commercial Mortgage Marketing Course; (3) a Fee Agreement; or (4) a regional copy of The Blackburne List of 750 commercial lenders.

 

 

 

 

Even if you are not a commercial loan broker, this particular training article has some lessons that you might find very helpful, especially the part about marketing leverage further below.

Before we go any further, it is important to understand that it is illegal to pay a referral fee on a residential one-to-four family dwelling loan, where the purpose of the loan is to either buy the property or to build it.  What about residential refinances or business-purpose residential loans?  I dunno.  Anybody else out there know?

Such referral fees on residential loans are called kickbacks, and the Feds will go absolutely bat-snot crazy if you violate RESPA.  They do not want people steering unsophisticated and trusting residential borrowers to higher-cost lenders.

 

 

 

 

Referral fees on commercial loans, however, are perfectly legal.  You do NOT have to be licensed.

If you are not licensed, however, be absolutely sure that you do not try to negotiate loan terms.  For example, you cannot say, "The bank will probably charge you 2.75% to 3.5% over five-year Treasuries."  Even though this is true, don't say it!  It might be considered negotiating terms.  Just work on a name and number referral basis, and you will be fine.

The standard referral fee for commercial loan leads is 20% of the lender's loan fee.  This is what Blackburne & Sons pays.

 

 

 

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

 

Marketing Leverage:

I have a business buddy who is spending a fortune advertising his mezzanine loans and preferred equity investments using Google AdWords.  Whenever I use Google to look up “supermodels in swimsuits” (haha, just kidding?), my buddy’s advertisement pops up. 

First of all, kudos to Google for knowing that I am in the commercial real estate business.  Kudos also to Google for showing my buddy’s very relevant advertisement.  Pop quiz, Google: "Where do I (old man Blackburne) stand on gun control?”  I am sure that Big Brother knows.

But holy cramps, this kind of advertising is incredibly expensive.  My buddy was moaning recently about the cost.  He needs to start using marketing leverage.

 

 

 

 

Marketing leverage is the technique of advertising to people who themselves are advertising like crazy.  By doing so, your advertising dollar is multiplied or leveraged. These guys who are advertising themselves have lots of leads to refer out.

Example:

Back in the days of snail mail - now called lumpy mail - it cost me over $1 (nowadays $2) to send each lumpy mail piece.  I quickly learned that adverting directly to the public for commercial loans was horribly ineffective.  But what ended up working like a charm was advertising to mortgage brokers, bankers, commercial brokers (real estate brokers who sell commercial property), and property managers (with whom I had a prior working relationship).

Each of these guys was spending at least $400 per month (today maybe $700) advertising for his own business.  I could reach each one for only $1 per month, and if they got a subprime commercial loan request, they would bring it to me.  Therefore my $1 was able to reach $400 worth of borrowers.  I enjoyed marketing leverage.

 

 

 

 

 

Today we can reach referrals sources by email, which is almost cost-free.  As you know, advertising to referral sources is still my preferred method, even though TONS of guys are now doing it.

I try to separate myself from the other guys by rewarding my loyal readers with funny pics, jokes, and helpful practice tips.  You guys just know, whenever you get a blog article or an email from me, that there will be some kind of reward for opening it.

But if I was my buddy, and I wanted to use expensive Google AdWords, I would build a list of referral sources and submit the list to Google.  Did you know that you can do that?  You can give Google or Facebook a list, and they will regularly throw up your advertisement to them.  In addition to referral sources like mortgage brokers, bankers, commercial real estate brokers and property managers, I would also throw in as many high-net-worth commercial property investors as I knew.  This list of actual investors would probably be much smaller.

 

 

 

 

Then I would only pay for AdWord ads to these special guys, not the general public. Most of them are advertising themselves for commercial real estate clients, and I would achieve marketing leverage.