Ever wonder where banks get the money they loan out?

Spoiler: it’s probably sitting in your checking account right now.

Yep, I’m talking about your money… and mine!

Banks primarily use customer deposits (checking, savings, CDs, etc.) to fund loans. It’s the classic model:

Borrow low (from depositors), lend high (to borrowers)

So when you deposit $10K, the bank might lend $9K of it out as a mortgage, small business loan, etc.

Now take this into perspective. Think about all the ‘everyday’ people you know—your neighbor’s retirement savings, your child’s college fund, your favorite local small business owner’s payroll account. This is where the money for your commercial real estate deal is potentially coming from and hence why they are strict with their terms.

Since they are not really loaning ‘their’ money, it means when they approve a commercial loan, they’re taking a calculated risk with someone else’s cash. So they tighten up the terms:

• Lower loan-to-value (LTV)

• Higher borrower requirements

• Tons of documentation

They’re not just protecting their interests — they’re protecting everyone’s deposits. That’s why banks tend to move slow, ask a lot of questions, and play it safe.

What % of Bank Loan Money Comes from Everyday People?

Roughly 65–75% of the money that banks lend out comes from everyday people — in the form of:

• Checking and savings accounts

• Money market accounts

• Certificates of Deposit (CDs)

• Small business accounts (mom & pop businesses)

💡 These are called “core deposits”

Why So Much from Regular Folks?

Because we’re reliable. Your grandma’s $20,000 CD that she opened years ago isn’t going anywhere fast or otherwise she will be penalized for it. That stability allows banks to safely lend against it.

Also:

• Deposits are cheap. Banks might pay 1–4% interest.

• Loans earn more. They can lend at 7–12% (or more in Commercial Real Estate).

• So they make a margin known as Net Interest Margin (NIM).

👀 What About the Rest?

The other 25–35% often comes from:

• Large institutional deposits (such as corporate treasuries)

• Interbank borrowing

• Fed loans

• Wholesale funding or credit lines

These are more volatile and expensive, so banks prefer to lean on depositors like you and me.

📊 Commercial Real Estate Lender Twist:

Non-bank lenders which is my area of specialization aren’t using customer deposits.

We’re mostly using:

• Investor capital (Limited Partners aka LPs, family offices)

• Securitized debt facilities (a group of bundled loans that are sold in shares to investors)

So there you have it.

That’s the tradeoff with traditional banks: their strict rules and slow pace can be frustrating, but they exist for a reason. When you’re borrowing from a bank, you’re essentially tapping into a shared pool of public trust — built from everyday people’s hard-earned money. So while it may feel like red tape, it’s really risk management at scale.

Understanding this helps you play the game smarter — but choosing the right lender isn’t just about knowledge, it’s about strategy. That’s where we come in.
At Live Better Capital, we help you cut through the confusion and match your deal to the right funding source — faster, with less friction.

🎯 Start by grabbing your free Funding Scorecard.
It takes 5 minutes, doesn’t hit your credit, shows you exactly where you stand — and what to do next to get funded.

DISCLAIMER: This is not real estate, legal, or financial advice. Please contact your preferred attorney or financial adviser for help specific to your needs or issue.