Guest post by Clay Sparkman
Okay, let’s face it: as we found ourselves sorting through the debris of the sub-prime crisis nearly a year ago, those of us who were involved primarily in the commercial finance business found ourselves thinking something like: “Oh man, what a mess: those residential guys are in a bad way. There are too many casualties to count and more every day. Thank goodness I knew better than to flirt around in that residential stuff. Commercial is good and sound, and I’m going to be okay.”
And then you pressed on with my business and watched commercial funds slowly but surely dry up over the course of the year that followed. Why? Well as it turns out, you can’t contain something as big as the sub-prime crisis. It impacts everything. There are several reasons for this: (1) Confidence destroyed in one area of finance will have an effect on every other area of the economy (and certainly other financial realms). Paul O’Neil (former Treasury Secretary) said it best. When asked in a recent interview why the sub-prime crisis had seemingly impacted nearly every major market throughout the world, he said (and I paraphrase): Imagine that you are in the wilderness and you have ten bottles of water, and you know that one of the ten has poison in it but you don’t know which one; well, let’s face it: you probably won’t drink water from any of the bottles. (2) Most real estate is up-stream, so to speak, from a person who needs “easy” home funding. So ultimately, residential land developments, construction projects, and rehab projects all had to be impacted. (3) The financial institutions are more tightly interwoven than most of us might have understood. So for example, even though your favorite commercial bank never so much as touched a sub-prime (or prime residential) loan leading up to the initial crisis, it may have been badly impacted, as one of the mega-giants that went down during the crisis may have also been a primary wholesale lender to this particular bank, and so you provider’s funds would have gone away all the same. The real impact recently came when banks stopped lending to banks.
So now that we have a 700 billion rescue package signed into law and now that the Fed has committed to increasing its loans to banks to 900 billion, I think it would be reasonable to hope/expect new funds to begin to flow. It is likely to be at least 30 days before the rescue package machinery is in-place and ready to roll, and it will easily be 60 days before the first loans are purchased by the Treasury. However, just the anticipation of these funds should help in thawing the freeze somewhat.
So if you are a broker of commercial funds or a borrower, the first question is no longer how to find a bank that will do your loan, but how to find a bank that will do any loans at all--and then the second question becomes how to find a bank that will do your loan. And so the challenge for users of commercial money is how to solve the commercial money puzzle. And I would like to suggest that a good place to start is with quality services that strive to match you up with quality active lenders and further to help you refine that search to the active lenders who are interested in your particular proposal.
So please: don’t be discouraged. Not now. Not when money (the life blood) is being injected into the system at unprecedented rates. Log onto Lendicom, enter your new proposals, and then submit them to the institutions that match up with what you are trying to do. Also, consider re-submitting some of your live proposals that didn’t initially find a home through Lendicom. Remember, nothing remains the same; everything has changed. Solve the commercial money puzzle. Lendicom can help.
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