The Truth About Commercial Lending: What Every Real Estate Investor Needs to Know with Jake Clopton
Commercial lending is one of the most misunderstood areas of real estate. Even experienced investors sometimes fail to grasp how different it is from residential lending. They assume it’s just a bigger version of getting a mortgage for a house. But it isn’t. The rules are different, the players are different, and the risks are different.
That’s why I was excited to sit down with Jake Clopton, the founder of Clopton Capital, on my podcast. Jake brought some serious knowledge to the table and broke down exactly how commercial lending really works.
Today, I want to share with you everything we discussed. If you’re serious about getting into commercial real estate, you need to understand these realities.
Commercial Lending Demystified: Underwriting, Negotiation, and the People Factor Behind Every Deal
Commercial real estate is not just about owning property. It’s about running a business. That’s the first thing Jake made very clear.
Understanding the Business Side of Commercial Real Estate
In commercial real estate, you’re not simply buying buildings. You’re buying operating businesses. A hotel, an office building, a retail center—these aren’t passive investments. They have cash flow, expenses, management needs, and business risks.
Lenders look at these deals very differently from residential loans. They care about how much money the property makes, how stable the income is, what the cap rates are, and what value-add opportunities exist. It’s not about your personal income or W-2 like residential lending. It’s about the property’s ability to sustain itself.
Why Every Deal Is Unique in Commercial Lending
There is no cookie-cutter formula in commercial lending. Every deal is different because every business behind the real estate is different. Lenders have to underwrite not just the borrower, but the business itself. That means looking at revenue, expenses, operations, management, and the market the property operates.
Some lenders will like your deal; others won’t. That’s why you can walk into one bank and get a very different answer from another bank across the street.
The Importance of Proper Presentation
Jake emphasized how important it is to present your deal the right way. You don’t want to dump a pile of unorganized documents on a lender’s desk. Clean, concise, and well-structured packages get more attention.
Give them exactly what they need to make a decision. Oversharing irrelevant information can actually hurt you. Stay focused on the key numbers and facts that support the strength of your deal.
Negotiation Is Key: Almost Everything Is on the Table
Unlike residential mortgages, where everything is pretty much standard, commercial loan terms are often negotiable. Interest rates, loan terms, covenants, and reporting requirements—these can all be discussed and adjusted.
Jake said he always asks for things, even when he doesn’t think he’ll get them. Sometimes lenders surprise him and say, “Yes.” So, don’t be afraid to ask for better terms, more flexibility, or concessions. The worst they can say is “No.”
Portfolio vs. Securitized Lending
Jake also explained the big difference between portfolio lenders and securitized lenders. Portfolio lenders—like banks and credit unions—hold the loans on their own books. They’re often more flexible and willing to negotiate.
Securitized lenders, on the other hand, sell the loans to investors. That means tighter guidelines and less room for negotiation because they have to meet specific standards for the buyers of those loans.
Loan Terms and Ongoing Obligations
In commercial lending, your relationship with the lender doesn’t end at closing. Many loans come with ongoing reporting requirements. You may need to submit quarterly financial statements, CPA audits, or revenue reports.
Some lenders even include covenants that allow them to call the loan if your revenue drops below a certain level.
Another key point Jake made is the danger of confusing physical occupancy with economic occupancy. Just because units are rented doesn’t mean tenants are paying.
Always verify rent rolls with actual bank statements. Some properties look fully occupied on paper but have serious cash flow issues.
The Relationship and People Component
Building strong relationships with lenders can open doors that a perfect spreadsheet never will. Sometimes it’s not even about the bank; it’s about talking to the right person within the bank.
Jake stressed that who you speak with can completely change your outcome. Some decision makers have more flexibility than others. This is where trust, credibility, and professionalism go a long way.
I also shared how I shifted my own business model to better manage tenants. We don’t call them tenants anymore—we call them clients. We enroll them in our Path to Home Ownership Program. This changes their mindset from renters to future homeowners and reduces management headaches tremendously. It’s a win-win.
Key Advice for New Investors Entering Commercial Lending
Jake offered some fantastic advice for those just starting:
- Present your deals professionally. Organize your financials, projections, and supporting documents.
- Don’t accept the first “no.” Keep shopping your deal to different lenders. One lender’s no might be another’s yes.
- Understand you’re not just buying property—you’re running a business. Approach it that way.
- Build strong relationships with lenders. They’re people too.
- Keep learning. Listen to real estate podcasts. Read books. Keep educating yourself, because commercial lending is always evolving.
Want to learn more about commercial real estate lending? Listen to the full podcast episode now!
Tune Into the Whole Enchilada of Real Estate Investing to Hear More Insights from Industry Experts!
Commercial lending may seem complicated, but once you understand how lenders think, you can approach deals much more confidently.
The truth is, understanding the business behind the property and building strong relationships can make or break your success in commercial real estate. The better you prepare, present, and negotiate, the better your results will be.
If you want to hear more conversations like this one, tune into The Whole Enchilada of Real Estate Investing. We speak with experts, like Jake, to give you the knowledge you need to succeed.
And, if you want personal coaching, guidance, and support as you build your real estate investing business, book a call with me. Let’s work together to take your investment to the next level!
Marigona Gllarevaa – Jan 01, 1970