I almost ripped the head off of one of my commercial loan officers this week. I had sent him a superb commercial loan lead, and he replied, "Oh, I didn't really work that lead because the borrower was looking for bank-type rates." I was so flipping mad, I probably looked like Godzilla after a missile strike.
"You cannot trust a bank to approve any commercial real estate loan," I told him. "A bank can turn down a commercial loan for a million reasons."
The loan could be too large, too small, or located too far away from the bank. The commercial building could be made out of brick, and the bank has just had a structural problem on a totally different brick building. Now the bank is against lending on any brick building. The property could be a gorgeous, new, state of-the-art self storage project, only to have the bank turn the deal down because it had just lost money on a 50-year-old, functionally obsolete, self-storage project.
The bank could be suffering liquidity issues. It simply doesn't have a lot of lendable cash sitting around right now. The bank could also be fully-invested, with a loan-to-deposit ratio far in excess of a prudent 80% to 90%. (Remember this important ratio and the target of 80% to 90%.)
The bank could be over-concentrated in office building loans or shopping center loans. The bank could be too heavily invested in commercial loans altogether. The bank could easily be having regulatory problems, with regulators suspiciously sniffing every single new loan - especially commercial loans. The truth is - and remember that 'ole George you taught you this:
God has never stopped inventing new and unique ways to kill commercial loans.
Therefore, if you are a borrower, you should never trust a bank to approve a commercial loan. I am not saying that you should never apply to a bank for a commercial loan. After all, commercial banks offer the lowest rates on small (less than $5 million) commercial loans. I am just saying that you must never rely on any bank to approve a commercial loan, especially if obtaining this commercial loan is important.
Now let's suppose that you don't really need the money immediately. Maybe you were playing with the idea of buying an investment property, but it wouldn't be the end of the world if the deal fell through. Well, in that case, no problemo. Go ahead and apply to bank. It's ironic, but the bank will probably approve your loan. After all, banks are famous for being willing to lend you money when you don't really need it.
But Heaven forbid you should have a chance to buy the land located right next to your existing manufacturing plant - a special piece of land more valuable to you than almost any other land on earth. Watch out! The bank is going to leave you standing at the alter looking stupid. It's going to turn down your commercial loan for the most stupid of reasons. "I'm sorry, Mr. Jones, but the land was located on the left side of the street." WTFudge? Left side? What if I approached it from the other direction???
Okay, what if you may personally need a commercial mortgage loan some day? What should you do? You just need to recognize the reality that there is a 40% chance that the bank will turn down your commercial loan at the very last minute. Just acknowledge that possibilty and have a back-up plan. You need a back-up lender.
My own private money commercial loan company,
Blackburne & Sons (since 1980), is happy to serve as your back-up lender. We get a ton of great loans this way because banks can be counted on to turn down good commercial borrowers at least 40% of the time.
Guess how much we charge to issue a loan approval letter for you? Nothin' honey. Not a red cent. And you can take our loan approval letter in to your own bank and say, "Look what these sharks are trying to charge me! You can beat this, right?" Banks love to undercut us. The very fact that a competing lender has already approved your loan makes your bank much more likely to approve your loan. After all, someone else is already willing to bet on you.
So, to you borrowers, I say, "Let us be your back-up lender. We'll issue a loan approval letter for you at no charge, and we'll be there for you if the bank let's you down." The same wisdom goes out to you commercial brokers (commercial realtors). You need to back up your banks because they can be very flakey.
But what if you are a commercial mortgage broker or a loan officer for Blackburne & Sons? My lesson to you today is to never give up on any commercial loan lead just because the borrower has applied to a bank. Always remember that bankers are flakes. At least 40% of the time the bank is going to leave that unfortunate commercial mortgage borrower high and dry at the last moment. Therefore, stick close to that commercial borrower and issue him a back-up loan approval letter right away. Special note to commercial loan brokers: Remember, you can get a back-up loan approval letter from Blackburne & Sons for free.
If you have been receiving my blog articles for awhile, you already know that I will give you an incredible directory of 2,000+ commercial real estate lenders for
free, just for contents of a single banker's business card. Does this offer seem too good to be true? There is a method to our madness. We use this info to send
funny newsletters to these bankers, in hopes they'll send their turndowns to C-Loans.com. I wasn't kidding when I said that God has never stopped inventing new and unique ways for bankers to turn down good commercial loans. We want those turndowns! :-)
To me it was always so obvious, but not everyone has caught on yet. The real money in commercial mortgage banking is not in paltry loan origination fees. No-no-no! The real money is in loan servicing fees. Once you start servicing your first loan, your life will never be the same.
The easiest way to start servicing loans is to become a hard money lender. For most states, no license is required to originate and service commercial real estate loans. My beautiful bride and I serviced our first 50 loans by hand using payment books. It was pretty easy. By the time you are servicing 25 loans, you'll be making more than enough dough to afford the wonderful loan servicing software sold by my old and dear friends at
The Mortgage Office.
If you combine my basic nine-hour course on How to Broker Commercial Loans with my course on How To Find Your Own Private Mortgage Investors, you can get both courses for just $849. Helluva deal.
One of our lead buyers closed a $6 million loan for C-Loans last week.