Rising interest rates, business friendly environment in Washington and the strength of the economy will help bolster commercial lending in the coming year
Interest rates are expected to go up this year and banks could realize new profits from small business lending. Interest rates are expected to rise the as economy improves in spite of the recent change of leadership at the Fed. The Fed has slightly raised interest rates at least four times since 2015 and this trend is expected to continue in the coming year. Banks and borrowers to both realize benefits from rising interest rates. Higher rates incentivize small business lending by big banks and this means more small business borrowers could see their applications approved. As of last November,The Biz2Credit small business lending index showed approval rates were on the rise among every category of lender. Even big banks approved 25% of all new small business loan applications.
The Trump administration is expected to continue taking steps to ease financial regulations in the coming year and create a regulatory environment which is friendly for banks. The administration recently backed a resolution which would restrict class-action lawsuits against banks. The Treasury has also tentatively announced plans to ease restrictions on loan securitization by banks and to reduce the frequency of bank stress tests. The administration has also essentially neutered the Consumer Financial Protection Bureau. All of these steps taken by the administration to ease regulations will to make it both easier and more profitable for banks to issue new loans.
Commercial lending is being boosted by the strong economy and both banks and borrowers are finding new confidence.
As the economy continues to improve more small businesses feel increasingly confident about their ability to pay off new loans. The SBA indicates both regional and community banks are processing a record number of new loan applications. Moreover these applications are being approved at a higher rate than in the past. Small banks approved 49% of all new business loan applications in November of 2017. Online alternative lenders also approved more loans over the same time period and approved 56.9 percent of all applications. In particular more of these applications were from lower quality borrowers. Borrowers with higher credit profiles are now more willing to approach traditional banks, which eases the ability of smaller businesses to qualify for loans from alternative lenders. The strong economy encourages business expansion , business lending and improves the confidence of both banks and borrowers.
2018 could be a landmark year for commercial lending.
Banks could realize new profits from small business lending as a result of higher interest rates. The pro-business environment in Washington will encourage banks to issue and approved new loans. However the state of commercial lending will largely depend on the state of the economy. Confidence in the economy gives businesses confidence in their ability to take on new loans and banks confidence in the ability of businesses to repay these loans. Without this confidence in the economy credit could rapidly dry up as banks stop financing new loans and businesses stop borrowing.
Dennis Dahlberg
Broker/RI/CEO/MLO
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.
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