ECHO Commercial Properties: Pens Down

I have written, spoken and sent smoke signals about the topic of refinancing commercial loans. One-fifth, or $929 billion, of the $4.7 trillion of outstanding commercial mortgages held by U.S. lenders and investors will come due in 2024, according to the Mortgage Bankers Association (MBA)’s 2023 Commercial Real Estate (CRE) Survey of Loan Maturity Volumes. The effect of moving from a 5% loan to a 10% loan can blow out any company’s profitability. Today, I want to cover the “pens down” effect in commercial lending.

Until the end of 2023, banks were writing commercial paper with regularity. Once we arrived in 2024, bankers have become much more cautious about who they lend to and how much they lend. Recently, a client of mine with credit over 800 was told that he would most likely qualify for financing of $1M, but that the underwriting would take more than two months to complete. Pens down refers to the lack of willingness to write commercial loans.

There are always options. Seller financing is more popular than ever, but many are asking for 3–5-year balloons rather than what standard commercial financing institutions offer, which is a refinancing after 5 years. Hard money options are out there but be prepared for 10-15% and prepayment penalties.

Bottom line – be prepared to make a strong case for institutional financing if you want a bank to write your loan or be prepared to face higher costs for your money and longer wait times to utilize it.

Contact Howard Freedland for more information on Commercial Properties!
Phone: 561.889.2735
Email: [email protected]
https://www.echocommercialproperties.com/