Is your credit union prepared for these? By Lisa Hochgraf
Most financial institutions distinguish commercial real estate loans from commercial loans because of their unique challenges, Jim Devine told attendees of the recent CUES Webinar, "Commercial Real Estate Lending Challenges and Growth." CEO of Hiperion Inc. and a co-presenter for CUES Advanced School of Business Lending: Commercial Real Estate Lending, (slated for Sept. 21-25 in San Antonio), Devine identified six ways commercial real estate loans differ from member business loans. Here are the first three: 1. Loan size. A member business loan might be $250,000; a commercial real estate loan might be $400,000 and up. 2. Net operating income vs. cash flow. A commercial real estate loan will be considered based on net operating income (all revenue from the property minus all reasonably necessary operating expenses); a member business loan will be considered based on cash flow (movement of money in and out a business). NOI will be different for an industrial complex, a multi-family rental unit, and an office complex. 3. Balance sheet dynamics. Commercial real estate has virtually no related balance sheet changes to consider: Decisions about commercial loans, in contrast, can be affected by dynamic changes to a company's balance sheet, especially during periods of growth. During the webinar, Devine explained three more challenges unique to commercial real estate lending. The playback of the full webinar is free to CUES members. Lisa Hochgraf is a CUES senior editor. Devine will co-present CUES Advanced School of Business Lending: Commercial Real Estate Lending, slated for Sept. 21-25 in San Antonio.
