Commercial Loan Tidbits

Commercial loan demand in late March and April is typically very, very weak. Commercial real estate investors don’t want to mess around with paperwork, especially when they have just finished the painstaking task of preparing their tax returns. In most cases, their complicated tax returns are not even done yet for 2020, so they have little choice but to put off shopping for a commercial loan until their tax returns are done in the mid-part of April.

The sun is also shining.  Many avid golfers are looking forward to their first rounds of golf for the year.  Many a nun has been run over by a golfer speeding to the first tee box.  Haha!

I once asked my mentor in commercial real estate finance (“CREF”) from 45 years ago, Bill Owens, what I should do when the commercial loan market slows to an absolute halt.  “Sometimes you just have to go fishing.”

Bill would actually fly to Mexico and go deep sea fishing off the coast of Baja California.  Lucky guy.  With the drug gangs rolling bags of severed heads down the middle of Mexican highways (this actually happened) in Guadalajara, I wonder if he still goes to Mexico to fish?

Why should you care if commercial loan demand is weak?  Suppose you own a business, and you have a balloon payment coming due on your commercial or industrial building in the next year.  It might make sense to apply right now, especially if 2020 wasn’t a great year for your company.

Commercial banks are very optimistic about the future.  With the passage of the whopping $1.9 trillion stimulus package, you can bet their Boards of Directors are  screaming at their Senior Vice Presidents of Loans to make some stinking commercial loans.  Commercial loans can be very profitable for the bank.

If your marginal commercial real estate loan request is the only lending opportunity available to the bank this month, your deal may suddenly look a little stronger.  Kinda reminds me of when I used to go to nightclubs as a bachelor-hound-dog 45 years ago.  I suddenly got taller (I’m only 5’5″ tall) and better-looking as last call approached.   Hey, girls can wear beer goggles too.  Haha!

If you are not working every day towards building a loan servicing portfolio, get OUT of the business. The money commercial real estate finance is in servicing!

By George Blackburne