In March 2015, the National Association of Realtors (NAR) invited a random sample of 49,485 real estate agents working in commercial real estate to complete an online survey. A total of 791 responses were received for an overall response rate of 1.6 percent. The survey asked real estate agents’ views on how they found their credit environment to be over the past year. Living and working in California, I find it interesting and informative to compare the overall results with the opinion of the surveys in our state. I think you will find it informative too. Without further ado, here are the opinions of private brokers and lenders as mentioned state by state:
States that provided difficult credit situations
The National Association of Realtors (NAR) found that 58% of investors preferred to approach banks, but not all banks were willing to lend. Of those that did, these traditional lenders compounded the situation with clumsy procedures, cumbersome timelines and deadlines, and lengthy processes. Few banks also made an effort to please their customers or to make their situation more comfortable.
Said a private lender in New York
Banks have been very aggressive in getting deals financed.
You can expect such a situation in a city like New York, where banks have to stand up to delays and have had to cut due to bad loans. In addition, New York is known for its aggressive and abrasive environment. The lack of empathy towards clients is one of his sore points.
More unexpected has been the fact that posh places like Louisiana are reporting the same difficulties.
Said a local agent:
Banks are doing well, but it is difficult for them to do business and it is difficult to move forward in an environment like this. – Louisiana
And in North Carolina:
Money is cheap, but it is still very hard to come by. – North Carolina
Apparently, the banks place the monopoly on investors and act like vile disgusting. Other investors said the following:
The rules established for large banks are handcuffing regional and community banks. – North Carolina
Just refinanced 3 properties from $ 150,000 to $ 1,000,000. Low loan for value offerings. – Colorado
Secondary market trade financing terms are so burdensome that it is not worth the process, or terms so strict that buyers do not see the value of the financing and only pay cash for smaller trade deals. – New Mexico
States that considered the credit environment good
If you want to invest, you can consider moving to one of these areas. There are fewer opportunities than in California. There may be a flatter market with distressed and possibly less promising inventory, but banks are more willing to help investors.
There is a lot of money available to qualified buyers of commercial properties. – Texas
Financing has not been a problem with reasonable transactions. Massachusetts
States that provide a positive environment for commercial private lenders work in
Bank credit conditions in most states in 2015 have been frustrating for consumers, making it an ideal situation for private lenders, such as hard money lenders who thrive on disappointed investors. Hard money lenders step in where banks fail with promises of convenience, solid support, customer convenience, fast turnarounds (think about getting a loan in the same week vs. 60 more days from banks!) and a lot less paperwork. All you would have to do is sign your name on some forms and fill in the details about the value of your property and your work, experience and / or credit history. Nothing important and much smoother than banks. The subscription, in short, is beautiful. Even loan-to-value structures in some places (particularly California) have recovered and private commercial lenders now offer higher or full rates.
The downside is high interest rates and balloon payments (think payments that are double that of banks). On the other hand, those eager to be rejected investors may have no alternative.
Pennsylvania and Carolina agents praised the private loan market:
Entrepreneurs are generally visionary and well ahead of the cultural curve, while banks apparently operate in a closed cave and make up for their lack of skill with aggressive rates and terms, or an unrealistic customer process. – Pennsylvania
Carolina was more severe. One investor explained that he preferred the alternative sector because:
I think the banks have let the whole country down. They are mindless lemmings and have abandoned their role in the biggest economy. – North Carolina
These agents in Georgia, Carolina, and Illinois, for example, who were defrauded by their banks, may have no choice but to seek out private commercial lenders, especially if they want to invest.
Illinois: Business financing is a problem. I have a large property on the market for 1 year and there are no buyers.
Another commented that banks are
Slow in loan processing. Abnormal waiting time to be financed. – Illinois
North Carolina: Commercial land loans are almost non-existent.
And Georgia. (Sounds very caustic):
When lenders start lending again, buyer-backed demand is very high and the economy will keep going. No money, no recovery.
Agents in Wisconsin encountered a similar situation:
Banks have become much more aggressive for owner-occupied transactions.
It seems that some private investors would find a ready market in Kentucky:
Generally, only local banks make business loans. It takes twice as long to get a loan and the underwriting requirements are too restrictive. – Kentucky
Finally, it seems that in Ohio, small businesses have no choice but to reach out to hard money lenders:
Big banks no longer lend to small businesses … only to large businesses.
Switch to the private business loan environment in California …
The National Association of Realtors found that private lenders run a booming loan business in California. More runners have joined and more are investing in the field. Private lenders in California have benefited from a growing interest in investment that followed the crisis of the recession. 2015 was a good year in which private lenders primarily served entrepreneurs and small business owners. As mentioned, these were the ones that were rejected by the banks.
Over the past year, private lenders have also made their field more attractive by eliminating one of its problems: the low loan-to-value (LTV) rate. Originally, lenders only distributed LTV rates that ranged from 50-60%, which is hugely low for the value of private property. A growing number of agents felt comfortable enough to increase their LTV rates to 80%. Some meet full ownership percentages. This and the tightening of government regulations to protect borrowers (especially residential borrowers) have made investors more willing to view private commercial lenders as an attractive alternative.
On the other hand, rising prices and high interest rates from lenders led to a growing percentage of defaults. New and inexperienced agents had more of these collapsed rebates than others. Defaults are projected to rise next year in large part due to rising interest rates. Government regulations have also intruded on the situation with cumbersome and cumbersome rules that force lenders to lengthen the time to acquire loans, making the original private loan situation less attractive.
Nonetheless, these years seem like a good time to enter the California private business loan market, especially if you know how.
These are some of the reports published by NAR:
Most people say they will talk to their bank to obtain business loans. – California
True. But then most are rejected. This is particularly due to the fact that:
Excessive regulations and self-imposed banking bureaucracy have made business lending difficult for legitimate clients. – California
This causes many investors to turn to hard money lenders.
I think there is enough money available, the problem is not the banks; It is the inability of the borrower to qualify for financing. – California
And another private lender who lives in California said:
Many, many obstacles to obtaining a loan. Even seasoned loan brokers are unsure of their offers until the end of the process. – California
That’s why hard money loans in California are thriving …