08/19/2010
Conventional Commercial Lending Shows More Activity, But What About Loan Demand?
Last month, we wrote about a CNN Money article that reported on weak loan demand near the end of June 2010. After the fact, analysts reported that commercial lending increased for the month.
According to a Business Insider article on banks beginning to lend again, Analysts reported that July continued the increasing trend of conventional commercial lending, extending the streak to two months in a row.
The latter portion of the CNN Money article reflected upon loan demand being weak, regardless of bank activity. This made sense as business owners continue to hold on to their cash reserves through the rough economic times. Taking out a loan is not as attractive as paying down current debt. Of course, this route takes a toll on some business spending, such as equipment renting, product development, sales, and marketing.
The Business Insider article makes a similar forecast about loan demand as of July 2010, extending the downward estimate for the remainder of the calendar year. Reduced consumer spending, which signals businesses to hold off on supply if the demand isn’t there, is one factor that is assumed to keep loan demand at a low level.
We’d like to observe how loosened bank loan regulation and the insertion of fresh capital from entities entering the commercial lending market, such as bond traders and other deep-pocket institutions wanting to capitalize on the commercial lending market, will affect the markets through the end of 2010.
As credit loosens up, the roles of conventional money come back into play. Down the food chain, hard money opportunities arise for customers who need the tool to make ends meet in order to qualify for conventional financing at a later point.
08/17/2010
New Forces Entering the Commercial Property Lending Market
If you’re feeling the squeeze caused by the current economic situation, you aren’t the only one. Other than our small-cap commercial mortgage segment of the market, other industries, such as bond trading and other securities, are feeling the effects of the slow recovery since 2007.
Nimble bond trading firms, like Cantor Fitzgerald, are making a move into commercial mortgage originations according to a blurb on the Wall Street Journal’s Plots & Ploys section.
While property prices start to stabilize, other firms outside of the commercial property lending segment are making their way into the market while traditional capital sources continue to hold credit close to the chest.
While this additional competition across all balance ranges may seem daunting, long-time competitors of small-cap commercial lending know that it takes more than a big wallet to provide funding to our various target markets.
There are relationships to be created and eyes to be attracted to such offerings. This doesn’t mean we can sit still. If a competitor can create a way to offer a more attractive pricing format while being able to offer extra values, and we do not move an inch to combat with better value offerings, we might start to see our trusted referral sources vanish right and left.
08/10/2010
Is Commercial Lending as Complicated for Credit Unions as Opponents Believe?
There is a proposal in the Senate that would raise the credit union small business lending cap from 12.5 percent to 25 percent. While this allows some credit unions across the nation to extend much-needed funds to small to medium-sized businesses seeking loans, opponents of the move say that credit unions are not prepared to handle such deals.
While credit unions and proponents of this proposal see benefits of increased borrowing, which could lead to different phases of subjective economic recovery, opponents see the move as infringing upon traditional bank roles.
Opponents also believe that credit unions are ill-equipped to handle commercial loans, according to a St. Louis publication recently covering the credit union lending limit proposal.
As an unconventional source of financing, we look further down the food chain. This fresh injection of capital could help loosen up an already stiff market. Our role is dependent on the demand for operation, acquisition, and mission-critical loans.
However, according to statistics from the St. Louis article, only a small handful of credit unions across the nation are even close to reaching their 12.5 percent cap, illustrating stagnancy in loan demand.
We’ve always had a strong and rigid philosophy when it comes to underwriting our hard money loans. Though credit unions would incorporate a more traditional set of criteria and conditions, are they set to handle the nuances of commercial lending?
Could this addition of loan supply change the market for the better? How would things differ in our segment of the market?
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