New Forces Entering the Commercial Property Lending Market

Posted on August 17, 2010 by admin

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.

Intention and Consequence

Posted on August 12, 2010 by admin

According to Forbes.com, Wells Fargo & Co. was ordered to pay nearly $203 million in overdraft fees back to customers and to change what was called “unfair and deceptive business practices” by U.S. District Judge William Alsup in the case Gutierrez v. Wells Fargo.

Wells Fargo’s currently processes checks from highest amounts to lowest, which in their policies, they intend to do so in the best interest of their customers. Imagine which payment you’d like to clear first—that cup of coffee or your mortgage? It makes sense at first glance.

However, this policy runs counter to unforeseen internal corporate emails and memos read by Judge Alsup that emphasize that the policies were to maximize the number of overdrafts. This intention is much different than looking out for customer interests.

While details of the case slowly aggregate on the internet, the case in point for today’s post is to shed light on intention. We are big on intention when it comes to the parties we involve ourselves with on a daily basis.

  • Commercial Brokers: Our intention is to work with you to find a home for your deals, whether it is with us, or with another lender.
  • Residential Brokers: We want to facilitate your deal so you can help your borrower confidently.
  • Bankers: Preserving your client relationships while assisting in rehabilitating their business through our alternative financing is our goal.
  • Borrowers: We implore you to get to know what we have to offer and know that if it is not a solution that fits your needs, we won’t push you to do anything. We’ll most likely show you someone else’s product that fits your situation.

The bottom line is that what smaller lenders can learn from this is that if you practice business with a firm, genuine intention, your customers will appreciate you for it. Saying one thing, but practicing it in a means that harms your customers is counter-intuitive toward building financial relationships that are quite sensitive in this current economic climate.

Is Commercial Lending as Complicated for Credit Unions as Opponents Believe?

Posted on August 10, 2010 by admin

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?

A Reminder to Back up Your Data

Posted on August 5, 2010 by admin

The Scotsman Guide, a national resource for residential and commercial mortgage brokers, recently featured Fairway America’s own Lance Pederson, VP of IT and Marketing, in their August 2010 issue.

Lance’s article, called “Back up Your Data,” encouraged mortgage brokers to take a moment out of their hectic schedules to choose one of two convenient ways to back up their contact lists, deal documents, and other sensitive materials.

A broker can gain some peace of mind by either purchasing an affordable portable hard drive, or subscribe to a remote backup service. More details can be found in the Scotsman Guide article on broker-friendly technology.

We’d like to congratulate Lance for having an article make the cut into the Scotsman Guide and for representing Fairway America in a broker-friendly, positive light on a national level.

A Mainstream Eye on Small-Cap Alternative Financing

Posted on August 3, 2010 by admin

While other news sources continue to hammer Congress and the Senate for its decision making regarding bigger banks and its imminent policy-making with small banks, it is refreshing to see a lens focusing on small businesses and their finance-seeking tribulations.

Sharon Bernstein of the L.A. Times covers small-cap alternative funding in her web column “When Money is Hard to Get, Small Businesses Turn to Hard Money.”

Bernstein introduces readers to hard money through a short video, followed by an article on small-cap hard money loans and the small businesses owners who seek them.

She covers an extreme example of a hard money loan, stating a high interest rate that causes a borrower to pay more than double their normal rent just to continue to lease the property that contains their business. One of her examples states costs including an interest reaching 36%, plus fees.

The most notable part of the article, despite its grim portrayal of small-cap hard money loan logistics, is its awareness that these loans are one of the only solutions available to small business owners, allowing them to pay mortgages, meet payroll, and have capital to produce more business.

They may take a hit to profits and operational funds, but it allows these borrowers to keep their businesses going through these hard times when they cannot find traditional funding through credit-frozen banks.

Watching Regulation Come in Through the Front Door

Posted on July 29, 2010 by admin

As regulation and oversight continue to increase the scrutiny applied to many commercial loan processes, we see its consequences as potential borrowers are turned down.

In somewhat breaking news, federal bank regulators approved a two-year old requirement passed by Congress that calls for Loan Officers to register into a federal database across the nation.

According to the Associated Press story, Loan Officers who are employed by any bank regulated on a federal and state level must comply.

By the end of the year, all fifty states are expected to participate, increasing the level of regulation not only vertically, but also horizontally through the front doors of banks.

While this may help assuage consumer fears in the wake of banking reputations that arose from the recent economic meltdown, how does it really affect our industry, especially our small niche of small-balance commercial lending? Is this kind of effort, money, and regulation as effective as it seems? We’d like to hear your opinion.

Is the $30 Billion Small Business Aid Package Just Another TARP?

Posted on July 27, 2010 by admin

There are criticisms against the latest proposed small business aid program that it might just be a community version of the Troubled Asset Relief Program (TARP).

According to Inc., the Senate voted 60-37 to attach the $30 billion program to go before the Senate once more this week in an attempt at generating what’s projected to be nearly $300 billion in leveraged small business loans.

On a national lens and in the shadow of TARP, it looks like another bailout. However, as small business financing specialists, we know that this money is in demand by the entrepreneurs and owners who need it as operating capital, as property acquisition capital, or as equipment leasing capital.

This money is borrowed to make ends meet, to launch new products or services, and to meet payroll and tax expectations. When businesses can breathe, production continues. Jobs and progress proceed as small business owners push through these troubling economic times.

What are your thoughts and opinions? Only by vocalizing what you see and feel in your own community can we dissipate the misconception held by the mainstream media that it’s “just another bailout.”

A Look beyond the Usual: Small Biz Boss Loans

Posted on July 22, 2010 by admin

Let’s take a moment to look at lending beyond the industry.

The Wall Street Journal wrote a piece on small business owners who lend money to their employees to help them catch up with other fees.

The article touches upon different examples of small loans, such as one employer who lends around 25 different loans, up to $4000 each, to help his employees make ends meet.

Another entrepreneur, who felt a strong bond with their employees, lent around $12,000 in separate loans to her 12 employees.

Due to the strong relationships between owners and employees, these loans are often repaid in full. It builds a strong relationship and loyalty between employer and employee. It also develops a strong reputation for the company when word of the generosity hits the media.

This act is a great illustration of the depth that some small business cultures can achieve.

Though these are examples outside of our industry, and more on a community level, it does break the constant stream of negative news that industries based on lending receive as of late.

It’s refreshing. It makes us wonder, “What equivalent good can we do for our different constituencies?”

Knowing your Customer and Building your Community

Posted on July 20, 2010 by admin

Wal-Mart’s Sam’s Club warehouse stores responded to the squeeze caused by the recession by closing stores and reorganizing their workforce. To make up for the change in service and convenience, they decided to boost sales via remarkable acts.

A Wall Street Journal report states that Sam’s Club will offer loans up to $25,000, targeting “minority-, women-, and veteran-owned businesses.”

Considering the fact that many of Sam’s Club’s patrons fall into the small business owner demographic, it is a suitable and fitting offering that their one-stop shop for many supplies could also supply them with a game-changing small business loan.

While many community banks tighten up their lending game due to increased risk and regulation, it is remarkable that a business outside of the lending arena would be willing to extend such a service.

This is a creative and strong value-add that many industries, that have survived the recession so far, can learn from.

Decision Making and Proper Research

Posted on July 15, 2010 by admin

As small business lending continues to move at a slow pace, Congress pushes solutions to get money flowing once more.

The conjecture is that if banks have money to lend to small businesses, the businesses will push production, hopefully employing those currently out of jobs.

In response to key U.S. Small Business Administration loan programs drying up, Federal Reserve Chairman Ben Bernanke urges banks to lend more to small businesses.

Currently, banks hold their lending capital close to the chest due to risk ratings and the volatile markets, while extensions for key SBA loan programs stall in the Senate.

However, there are analysts that feel that more data is needed. They claim that funds should be allocated to researching deeply into discovering why lending demand is at a slump.

Could this mean a lens over not only community bank borrowers, but also private money borrowers as well? Knowing every angle of how and why business and property owners shop around for hard-to-get loans could shed some light on data that seems to be missed out on by the Fed.