Why Private Commercial Lenders Are In Demand

Because of the decline in capital in typical banking markets, the majority of the banks have lacked the capital to finance large loan growth. Though several banks have gotten their balance sheets to the point where they’re healthy again & are actively financing new transactions, many banks have limited overall capacity & are emphasizing their loan growth on core low risk lending markets like owner-occupied commercial properties, apartment buildings, and C&I lending relationships(commercial & industrial lending such as receivable, equipment, and inventory finance).

In order to fill the gap left by typical commercial bank lending, there has been a rush of private capital into the market keen to make higher risk loans. Listed below is a sample of many of the loans regular banks aren’t eager in making where private capital has come in & filled the gap.

Poor Credit: 

If a borrower has a poor credit history, had to file bankruptcy in order to prevent a bank from taking aggressive collection action, or has missed some loan payments because of pressure with other holdings, majority of the commercial banks wish nothing to do with those transactions. However, a private lender can look beyond these problems & look at the real worth of the asset and cash flow they’ll be loaning against, and provide these loans regardless of the credit history.

Construction Loans: 

Regular banks are pretty reluctant to finance construction loans in this market, whether it’s ground up construction or just rehab construction, because of the increased level of risk concerned with those projects & the increased capital needs banks have put into place for those projects. Private lenders don’t have extra capital needs, so as long as they can allay much of the risk, they’re willing to finance construction loans.

Transitional Properties: 

Quite often borrowers have properties that are in transition & may have a high vacancy rate or are in need of some work. Conventional banks often don’t wish to take on the risk of a property that’s not generating strong cash flow & isn’t fully improved. However, private lenders don’t hesitate to take that improvement risk & are willing to finance many such projects.

As you can see, there’re several reasons why private lenders makes sense in this market. With a lot of private lenders providing conforming fixed rates, quite often the products these lenders are giving are just as competitive as numerous bank programs, but are accessible to a larger proportion of commercial loan borrowers.

If you are in need of competitive commercial lending in Texas, look no further than Commercial Loans of Texas. We specializes in commercial lending in Texas for small to mid-size firms that require working capital financing to meet income needs.