These are unprecedented times. No one has ever seen anything like this in the real estate world. It is now safe to say the residential bubble has not only burst, but has burst atomic style.
The residential real estate market has been hit the hardest with homes in certain areas selling below 50% of their appraised value only a year ago. The swing in home values have sent banks, non-bank lenders, insurance companies, and investors running frantically desperately searching for any last ditch effort to avoid shutting their doors.
commercial financing has historically been approved based off of the cash flow of the property or operating company located at the property, but many of the consequences of the residential market are seeping quickly into the commercial market.
While it would be absurd to say that these are the only 5 things that are affecting commercial financing, they are 5 of the most significant consequences of the real estate market meltdown:
1. Stricter underwriting guidelines imposed by banks and non-bank lenders
2. No concrete financing programs
3. Rising interest rates
4. Business deposit relationships being required
5. Longer approval process and loan closing time frames
These 5 areas of change will affect the way borrowers, sellers, brokers, and lenders should look at obtaining commercial financing. To disregard any of these things would be poor judgment on the end of any of these parties and inevitably cause further problems.
No one knows how long this crisis will last, and it is expected to be awhile before lenders are comfortable with stable real estate values and financially stable borrowers, so it would be wise to take these 5 changes into consideration when seeking commercial financing.