Your Banker Doesn't Work on Commission
And nine other things they wish you knew
We’ve been working through some dense topics in the pages of The Sunday Morning Post so far in 2025 (e.g. housing and rental market previews, the insurance crisis, immigration, and inflation). For this week, I thought I would offer some lighter fare, which is part advice and part personal perspective from my experience as a commercial lender.
I am coming up on ten years as a commercial lender. With that in mind, here are the ten things I wish all of my borrowers knew about bankers:
Your banker doesn’t work on commission. Because it is so common in the real estate industry for people to get paid by the transaction (e.g. realtors, appraisers, inspectors, title companies), it is assumed by some that the lender is also paid this way. But almost all lenders are paid on salary, with the exception perhaps of independent mortgage brokers or others in a broker/consultant’s capacity. Sometimes I will be part of a deal that is hanging on by a thread, and the realtor will say to me something like, “Don’t you want to get this deal done so you can get paid?” No. In fact, my life would be a lot easier sometimes if these marginal deals actually did not take place. But on a more specific point, banks don’t incentive their lenders around commissions because if they did, it would skew lender behavior towards prioritizing loan growth only rather than also being mindful of loan quality. Lenders are partly risk managers for the bank, and loan quality matters just as much (if not more) to the bank than simply the number of transactions or the overall amounts booked.
That being said, your lender’s default position is usually to try to get it done. No one becomes a lender to say no to deals. We are legitimately supportive of your projects, curious about what you want to do, and it’s more fun to say yes than no. If someone wants to be in banking but gets more enjoyment out of saying no, there are other places for them, like being a credit analyst or in compliance (shout out to my credit analysts and compliance people, if you’re reading).
Your lender doesn’t like the processes either. If you are getting a home loan or a business loan, there may be a dozen pieces of information or more that you need to provide to the bank. The process is often cumbersome, frustrating, and slow. It feels that way to the lender, too. Most of it is beyond your lender’s control; 99% is based on banking regulations and oversight requirements that have been baked in for decades and there is very little your lender can do about it.
You need to have mastery of your financials, and they need to be at your fingertips. If your lender needs things from you during the underwriting and approval process, you need to be able to provide them. If you don’t have them, you need to compile them, and sometimes quickly. If your banker needs an updated Personal Financial Statement from you, just fill it out. If it is April or May and your tax returns for the previous year aren’t done yet, you need to be able to provide detailed P&L’s and income statements. Borrowers who have these things at the ready stand out in a positive way. For borrowers who do not, the opposite is true. It’s also not the lender or credit analyst’s job to compile them for you (although a good lender will help you get organized and prioritize what is most important, to the extent possible). Come prepared, and be organized because remember #3 above, your lender doesn’t like these processes either. Don’t make it harder for them by not having all of the information they need to help you get your loan.
You don’t want to show up on any lists. Banks have lists, and mostly bad ones. There is a list of past due loan payments. There is a list of REALLY past due loan payments. There is a list of insurance policies that have lapsed. If you get a lien or foreclosure notice from a city or town due to unpaid property taxes, guess what: the bank gets one too, directly from the town, and you end up on a list for that. Once you end up on one of these lists, it makes future lending much more difficult, and it also really restricts the available options to you when you need flexibility or other types of help. Stay above board, and stay off the lists.
Most borrowers are making all of their payments, on time, every month. Borrower delinquency rates in 2024 across all community banks were about 0.30%. That means that 99.7% of all borrowers were making their loan payments as expected. If you’re not making your loan payments, you’re standing out, and not in a good way (see Item #5 above…stay off the lists!).
Don’t go dark on your lender. This applies in the underwriting and approval process, and also post-closing, particularly for commercial loans. I’m not necessarily talking about home loans here, which is more of a one-and-done thing; you may never really talk to your residential loan officer again once the loan is booked. But for business loans, you should be in communication with your lender regularly. It is helpful for your lender to know what is going on, what your challenges are, and where you could use additional support. It’s important to put your best foot forward, but don’t sugarcoat things either. It’s always better to over-communicate issues than to under-communicate. If you go dark, though, it makes it harder for your lender to help when the time comes. Banks are also audited regularly by both internal and external regulators. Lenders need to be able to show they are staying in touch with you, and they are often logging memos to the credit file based on their communications with you. If you’re hard to reach, that makes for a thin credit file. So reach out, provide helpful updates, and better yet, updated financials.
Treat the entire bank staff with respect. The best banks work together as highly functioning teams. As the commercial lender, I’m going to work through the loan underwriting, approval, and closing with you, and I’m going to stay in touch with you for hopefully years to come about your evolving needs. But if your automatic payment on your monthly loan payment gets messed up for some technological reason, truth be told I have no idea how to fix that. But I’ll connect you with the banking associate who does. If you are condescending, rude, or meanspirited to that person, well you’ve just ended up on my own list. If you’re rude to my assistant, forget about it. Highly functioning assistants control a lot of the workflow for a lender, and you don’t want to mess with them.
Be a good person. The corollary of Item #8 is to just be a good and decent human being. Your lender does have tools and tricks to help you out of sticky situations. If you haven’t gone dark on them, you’re trying the best you can, and you are at your core a kind-hearted person, it buys a lot of goodwill that could save your butt later on. I don’t need boxes of chocolates sent to me or other tangible or material gifts: I just want to work with people who are caring, thoughtful, good human beings. I could give you a handful of examples of borrowers who probably should have been foreclosed upon months prior, but because they were kind and caring and were always in communication, the bank went way out of their way to help them, oftentimes saving and salvaging their businesses and livelihoods. A close cousin to being kind, by the way, is being easy to work with.
We care about you. This perhaps feels like an overly cliched concluding point, but it is true. Some of my bank customers have become among my closest friends in the world, and the people I care about the most in life. A good lender becomes part of your team, and the best borrowers welcome that person in. However, this can also make things especially challenging if a loan starts to go sour. The hardest part of the job for me is when the tone and temperature of my interactions with borrowers goes from being a supportive and interested representative of the bank, to the representative of the bank that has to crack down on delinquencies and other problematic tendencies. Just as no one gets into lending to say no, no one becomes a lender so they can send demand letters and initiate collections. But that is a part of our job, too, unfortunately.
Bonus Item for 2025: you may think your lender (and his or her bank) wants to lend as much as possible. After all, doesn’t the bank make more in profits by lending larger amounts? Actually, sometimes banks want to lend less. This is mostly because in doing its underwriting, the bank can recognize when you’re potentially taking on too much debt. No bank wants an overleveraged borrower, particularly if you happen to be in a high-risk industry. Sometimes banks will say no to a deal that will surprise you. Sometimes it is just because the bank’s appetite for risk is low at that moment in time, but oftentimes it is because you’re trying to embark on a project or make an acquisition that is too leveraged or beyond your means. If you get rejected for a loan, it is okay to feel disappointed, but ask your lender if they will sit down with you to review the analysis so you can understand why. I have had a number of deals where the credit analyst working on it with me has said, “We would be doing this person a favor to not approve this.” If that’s the case, you should understand why. Although maybe by sitting down together, you can also help explain something the lender and the credit analysts might be missing.
There are a handful of other topics that didn’t quite make the list. Don’t badmouth your previous bank, for example. Just as on a first date it’s not a good look to trash the person you were with before, the first time you meet with a new lender it’s not great to say all the things that were wrong about the last bank you were at. There are a lot of red flags in that.
To conclude with a parting thought, keep in mind that your lender should be a great partner to you in your banking activities, but they are also risk managers. Loan growth is not the only incentive. So too is loan quality, existing portfolio management, and file maintenance. Your banker is also likely to have dozens if not hundreds of loan relationships in his or her portfolio. So the more you can do to be organized, responsive, to communicate in positive ways, and to be, in a nutshell, easy to work with, the better. I have some borrowers who essentially do a portion of my job for me by providing updated financials proactively, sending me photos of construction progress regularly, and going out of their way to keep me informed about their business throughout the year. Combine that with being a decent human, and you’re a dream borrower with a happy lender.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
Great article. Brings back memories from my Lending days.
I never knew you want pictures of construction and upgrades. Also some other good points. I’ll keep that in mind if I’m in the market again.