Commercial Lender’s Guide: Shifting Focus in Today’s Market

What to Expect

Shifting Focus in 2023

Despite the tumultuous second half, CRE performed relatively well in 2022, with apartments at full occupancy, warehouses showing growth, and retail sites recovering after 2020. Even with all these positive metrics, Commercial lenders are faced with an increasingly problematic market with interest rates resulting in a decrease in loan volume. With interest rates that rose quickly in 2022 along with inflation, many borrowers needing real estate-secured loans are faced with higher financing costs, lower loan amounts, and more protective covenants for lenders and investors.

Where is the shift?

With the market where it is, what should commercial lenders do?

We know and understand commercial lending and commercial real estate and we know that in times like these, lenders can and should, shift focus.

In this guide, we’ll address four (4) emerging products for 2023 and tell you the why and the how:

  • Loan Mods
  • Bridge Lending
  • Mezz Lending
  • C&I Lending

By shifting focus to these loan types and leveraging solutions that support these loans, commercial lenders and institutions can access opportunities in an increasingly complex time for commercial lending.

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Pursuing Business in a High-Interest Environment

A number of economic factors are limiting borrowers’ access to cheap, easy credit or investment. Yet, businesses continue to need loan funds and additional capital to pursue their business in a high-interest environment driven by Federal Reserve policies aimed at reducing inflation.

The purpose of rising interest rates is to slow the flow of capital, but the reality is that businesses still require additional funds, whether in the form of debt or investment, to maintain, sustain and/or expand their business ventures during tough economic times. Because direct investment by third party investors always comes with control issues, debt remains the first preference for real estate developers and businesses to address capital needs. Hence, the need for bridge loans, mezz loans, C&I loans, business lines of credit, working capital lines of credit and other similar types of loans that provide higher interest, but shorter term capital.

These loan types are favorable for both lenders and borrowers in this current economic environment.

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