Why Banks Are Lagging In the Commercial Mortgage Lending

Commercial mortgage lending markets are expected to experience strong growth through the remainder of 2021, forecasted to increase by 11%. Pent-up demand, increased savings, and favorable interest rates are driving real estate purchases in most sectors.

This means more investors are looking for lenders, but not all banks are prepared to keep up with the increased demand. Many banks are already lagging in the commercial mortgage lending game, causing them to miss out on opportunities and leaving the door wide open for their competition.

In this article, we’ll discuss why commercial lending is lagging and how the industry can catch up.

Why Commercial Mortgage Lending Is Lagging Behind

It’s no secret that banks have not historically been considered to be the most innovative businesses, but surely they’ve adopted new technologies to keep pace with the modern world, right? As it turns out, some have and some have not.

Commercial Lenders Are Slow To Adopt Technologies

Many traditional financial institutions haven’t been keeping up with consumers’ and investors’ expectations, especially those in the commercial mortgage lending world. In 2019, 43% of US banks still used COBOL, a programming language created before the internet. We live in a modern world where smartphones and self-driving cars have become a topic of normal conversation, and yet our financial institutions are severely lagging.

“Reluctance to adopt new technology can stand in the way of innovation, and this, in turn, can lead to unintentional and potentially hazardous forms of disruption.” — Forbes on Trends Disrupting CRE

The slow rate at which many banks adopt new technologies puts them at a disadvantage as they face intense competition, both from other banks and new, alternative lending platforms.

Today, over 25% of loans are of direct-to-borrower originations — bypassing banks or traditional financial institutions altogether. These digital commercial mortgage lenders are growing rapidly and threatening to cut out banks entirely. For example, Crowdstreet has $1.25 billion invested, Fundraise has over $1 billion invested, and Yieldstreet has more than $375 million invested.

If traditional financial institutions don’t start evolving, and quickly, they will soon be left behind.

Residential Lending Has Already Evolved

While commercial lenders have been slow to adapt to change, the opposite has been true for residential lenders. These lenders have recognized that consumers now begin their search for products and services online, and have adapted to meet those changes in expectations.

Today, 92% of residential borrowers start their search by researching lenders online, compared to only 20% in 2015. In addition, 74% of borrowers use an online portal to work with their lender, and 43% complete their entire application online. This is in stark contrast to the traditional commercial mortgage lending process, which involves a lot of phone calls and months of waiting.

So, why have residential lenders opted to adapt to the changing expectations of their consumers? As it turns out, there’s more to gain than just a happy customer. Data shows that the lenders who have adopted new technologies close faster, use less effort and achieve higher levels of satisfaction compared to their peers.

How Commercial Lenders Can Catch Up

With years of experience in the commercial real estate lending world, our team at Finance Lobby has witnessed the industry’s shortcomings firsthand. Lots of inefficiencies, frustrating processes, and a clear need for innovation.

That’s why we’ve designed Finance Lobby to be the perfect solution for commercial mortgage lending. In the same way that Uber, VRBO, and Favor have revolutionized their respective industries by introducing technology and addressing supply and demand needs, we are using the same strategy to help commercial lenders stay competitive in today’s market.

For commercial lenders to catch up, we believe two steps must be taken.

Do Away With The Traditional Process

On average, it takes three months to close a commercial real estate loan using the traditional process. The broker has to make dozens of calls to individual banks to find deals, and the lender has to go through a months-long due diligence process to decide if the deal works for them. If it doesn’t, the borrower is back to square one and has to start the process over again.

At the end of the day, this process is bad for both the borrower and the lender.

With all of the back and forth negotiating and long lead times, borrowers rarely end up with exactly the deal they wanted. At the same time, the months of due diligence make lenders slow to react to changes in market demand and risk. More often than not, both parties leave the process frustrated and wishing there was a better way.

By doing away with this process, commercial lenders will be well on their way to catching up with their competitors in the lending industry.

Use Tech To Streamline Transactions

The commercial mortgage lending industry’s reliance on legacy tech hinders agility and performance and puts commercial lenders at an extreme disadvantage. To remain competitive, commercial lenders must adopt new technologies.

In stark contrast to the traditional process, technology gives commercial lenders the ability to decrease turnaround times, eliminating the need to wait months for a loan decision. It also gives lenders the tools they need to react faster to changes in market demand and risk, giving them a competitive advantage in today’s rapidly changing commercial real estate market. With these benefits in mind, it’s no wonder 99% of lenders believe technology can help improve the commercial mortgage application process.

Luckily, commercial lenders don’t have to come up with a technology solution of their own. Finance Lobby is already addressing the major problems and inefficiencies present in the commercial real estate lending industry, giving lenders a turn-key solution to improve their processes and catch up to the competition.


The commercial mortgage lending game has remained unchanged for a long time, but that can no longer be the case. With new technologies, new competition, and new lending alternatives all pursuing the same deals, it’s now more important than ever for commercial lenders to evolve.

Finance Lobby gives commercial lenders the tools they need to meet those challenges head-on. If you want to learn more about how Finance Lobby can help you leverage technology to build agility in today’s evolving market, check out our latest infographic or contact us today and we’ll help you find the deals you are looking for.

September 3, 2021