Will Banks Ever Lend Again, and if so, How To Get Your Deals Funded

by | BiggerPockets.com

I was speaking with one of my coaching clients this morning whose has purchased some killer deals using his Home Equity Line of Credit and private lender funds.  This client now needs to recapitalize to get the cash out of these properties so that he can continue his buying spree.

During the course of the conversation his primary question was… “Are banks still lending?”

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Are Banks Still Lending?

Well, if you believe the president they should be.  In fact he brought them all to Washington to twist their arms to get them to loosen up their purse strings.  Did it work?  Only time will tell.  Keep in mind that the regulators are telling these same lenders to tighten their lending standards.

Based on what I am hearing, but have been having trouble verifying, many lenders aren’t lending because they claim no one wants to borrow.  Obviously, these lenders are not talking to active and successful real estate investors.

Keep in mind that the banks that got called to the White House are the “too big to fail” banks, and these lenders typically don’ t know what to do with customers like you and I.  We just don’t fit the model and of course our business model just happens to be in the one asset class that is killing them figuratively and literally… real estate!

Getting back to my client and his question.

Yes… lenders are still lending!

I have spoken to this subject on many occasions.  There are lenders who are lending.  They need our business!  And the really great thing is they understand our business and are comfortable with the risks and how they are managed.

Regrettably, there aren’t as many of them as there used to be.  The meltdown has claimed many of them, and many others are on the brink of failure.  So finding them is a process that involves more then just walking in and proving that you can fog a mirror!

My specific response…

My response was simple and is captured below…

  1. I’ve said it a million times… so I will say it again — you should only be talking to small (less then $200M in assets) banks.
  2. You need to separate yourself from all the other customers that come through that bank looking for a loan.  Specifically, how well do mitigate any risks the bank may perceive?
  3. To do stand out amongst the crowd you need to demonstrate that you, your business and your business plan represent a worthy risk to this bank.
  4. You need to answer these questions for the bank…
    1. Who are you (corporately and individually)?
    2. What is your relevant real estate experience)?
    3. Are your business goals consistent with your previous experience?
    4. How does your plan leverage your strengths and mitigate your weaknesses?
    5. What systems, advisers, processes, etc. have you implemented/use to successfully manage your business?
    6. What do your financials look like?
    7. Is the deal a solid deal?

And with that advise my client marched off to prepare to start the process of interviewing lenders.

Yes… you read that correctly!

Even in today’s market every lender I know puts their pants/skirts on just like you and me.  And when you go to visit them or speak to them on the phone, you are giving them an opportunity to do business with you.  Not the other way around.

Remember… they need your business just as much as you need theirs.  Don’t grovel and don’t be timid.  Own it and you will be amazed at the outcomes!

Photo: romulusnr

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.


  1. Brian Dickerson on

    Peter, I’ve always used small local banks, and I agree they’re the way to go. One thing I’ve noticed is that many of them have has issues in the last year or so with undercollateralization (which results in intermittent lending interruptions… bad when a closing is on the line). The simple fix is to line up a few different banks, which is never a bad idea anyway. – Brian

    • Brian… great points. I have often said that the worst number in business in “ONE”.

      If you only have one vendor of any sort, especially only one lender you are putting your business at risk. The other great thing about multiple lenders is that many times their criteria to fund a deal are different… one from the other… so you can select the best lender for the your deal.

  2. Hi Peter,

    Your article ‘hit home’ for me.

    I am a Canadian, and I work for one of Canada’s major banks. (That is my day job. Real estate investing is my evening and weekend job)

    For many years, fellow Canadians used to poke fun at our Banking system, and they also used to express a lot of their frustration with the rules and regulations of our banks, as well as the lending practices.

    Throughout the economic turmoil, the Canadian banks did pull back a bit as well, in terms of commercial and residential lending. I mainly witnessed the pullback with commercial lending, as that is the area of the bank that I work in.

    At the end of the day, I am very proud of the Canadian banks and their preparation, and regulation. It was through this regulation that our banking system prevailed.

    I was also very happy to see the international recognition given to the Canadian banks over the past several months.

    Best Regards,
    .-= Neil Uttamsingh´s last blog ..What is the X Factor and how can it help me buy my first rental property? =-.

    • Neil, It’s great to hear that not every lending institution had as its only criteria that a person just needed to “fog” a mirror to qualify.

      But then again, Canadian lenders probably weren’t required to lend to support Government dictated social policy either… as was the case in the US.

  3. Great article, good advice. I’d be curious, have you seen any trends in what banks are looking for in a business plan? Also, in my experience, banks look to mitigate risk of any project by asking for more cash from the investor, personal guarantees from people with great credit, etc. Do you have any advice on how to alleviate risk without putting in more capital?

    • Patrick,

      The biggest trend is the you know your market inside and out and how the market and its challenges will impact you and your projects… and of course how are your going to deal with these challenges. Other than that Item 4 provides the needed guidance.

      You are absolutely correct that one of the methods banks employ to reduce risk is to seek greater financial input from the borrower. The best way to deal with this is make sure your deals are purchased well withing their lending requirements and seek out private lenders to help fill in your financial gaps. In other words… Other Peoples Money!

      Best of Luck!


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