The Flipside with Blake Shultz

Demystifying Commercial Lending: Insights from a Relationship Banker

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Jack Hutcheson, a seasoned commercial lender, delves deep into the realm of commercial lending, shedding light on the fundamental differences between residential and commercial loans. He highlights the significance of building strong relationships with clients, as character and trust play a pivotal role in securing favorable loan terms. Throughout the episode, Jack unveils five key takeaways:

  1. Commercial lending is a "relationship game" where character and trust are paramount, often leading to better loan terms compared to a purely transactional approach.
  2. Unlike residential lending, commercial lenders primarily focus on global debt service coverage and net income, rather than gross income or debt-to-income ratios.
  3. Loan terms, such as amortization periods and interest rates, are tailored to each specific deal, reflecting the lender's assessment of risk and the borrower's financial strength.
  4. Appraisals play a unique role in commercial lending, with lenders typically relying on the lower of the appraised value or the borrower's cost as the basis for lending decisions.
  5. Development financing requires a significant upfront equity contribution from the borrower, typically 15-20% of the total project cost, with the lender funding the construction phase.
    6. ...more
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    The Flipside with Blake ShultzBy The Flipside with Blake Shultz