Commercial lending practices change with the economy, markets, and rising or falling risk factors. The end of 2017 is seeing historical challenges from regulations as well as emerging risks.
Interest rates have been at historically low numbers for some time even with the Federal Government raising the rates twice in 2017. Moderate job gains and economic activity were noted as the reasons that the interest rates will undoubtedly continue to their third forecasted hike for 2017. This hike in the central bank’s federal funds rate is expected to raise the interest rates of home equity lines of credit as well as credit cards. According to The Risk Management Association, “Rising interest rates on floating rate loans may negatively impact borrower cash flow and result in lower debt service coverages.” This will encourage commercial lending institutions to take a close look at invested equity in order to secure their loans.
Retail issues have been at the forefront of commercial lending concerns for the last two years as more brick and mortar retail stores are shutting their doors in the wake of e-commerce’s takeover. Multi-use projects are taking over the “shopping mall” segment as newer generations place a strong demand on living, working and playing “under one roof.” These multi-use projects have entertainment venues, restaurants, shops, office space, residential units, grocery stores, gyms and even storage spaces. Atlanta developers recently took on a multi-use project next to the Braves new ballpark. It consists of 41-acres with three luxury apartment buildings, entertainment venues, retail and offices and, including the ballpark, came in at $700 million to complete. Of course, it’s still not complete, but is expected to undergo the finishing touches by the beginning of winter.
Regulatory concerns have been raised regarding commercial lending institutions with high commercial real estate loan concentrations. Because of this, underwriting standards have been scrutinized and will reveal this in tightening of their lending belt. Surprisingly, one of the worst performing commercial real estate sectors is construction loans, which has led to a reduction in this sector in bank’s loan portfolios. Multi-family is starting to see some saturation in larger markets while single-family homes are proving to be in high demand, particularly those in the mid-price range. Banks will eventually adjust their lending strategies to reveal these market changes.
With traditional lenders tightening their underwriting standards for various segments of commercial real estate, alternative lenders have become increasingly important to those in these sectors. Contractors, developers and business owners are reaching out to non-traditional lenders with one of these being private hard money lenders. A private hard money lender is not bound by the same FDIC and government regulations and can lend according to their specialized investment portfolios. Because they are asset-based, they do not require impeccable credit scores.
At Level 4 Funding we provide private hard money loans for all sectors of commercial lending including construction, office, retail, small business, industrial, multifamily and multi-use.
Because we work with private hard money lenders, we can approve loans in as little as 24 hours and fund in less than a week. We may very well be able to fund your project when other institutions have rejected your request.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.