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I Love My Banker – Part III

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In earlier articles, we briefly discussed some of the challenges, regulations and restrictions your local banker is dealing with. Knowing these will help you as a borrower, buyer, or broker be more profitable in 2010-11.

Commercial Real Estate, CRE, ratios are driving many of the decisions your bank is making today. If you or your clients have a commercial investment or development loan coming due in the next 12 months, be prepared to move it or pay it off. You say, “Ted, I’ve been a client of the bank for years and current on my payments every time. I have great credit.” The bank is as likely to ask you to pay off because you can.

If your bank’s CRE ratio exceeds 300% (commercial investment and construction loans compared to capital), they are not making new or renewing CRE loans. Ask your banker before your loan is due.

If your bank has a CRE problem, what can you do to encourage them to renew your loan or make a new one?

  • Buy a small REO at full price, if they renew.
  • Pay down the loan 10-20% for an extension.
  • Offer more interest. Cheaper alternative for you than a new loan.
  • Exchange your CRE property for non-CRE property, if the bank will move the loan and/or extend more credit on the non-CRE asset. (Ask your banker what qualifies)
  • Bring deposits to the bank to offset part of your loan. These new deposits would not be pledged as additional collateral. Where do you find new deposits?
    • A 501-C-3 board you sit on
    • Family member or friend that banks somewhere else
    • Other businesses that are friendly to you. As an incentive, you may have to give the new cash depositor 5-10% of the equity in your project.
  • Offer to pay off your loan for a discount.
  • Give the bank additional collateral.
  • Sell the land under the asset and give the bank proceeds.
  • Syndicate the loan. Definance with new partners.
  • Condo and sell to the tenants. Bank can finance tenant since they are owner occupied.
  • Make tenant partner in building if bank will finance new LLC owned 50% by tenant.
  • Etc, etc, etc.

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