Banks Are Getting Healthier

The credit markets are healing themselves too. The banks with troubled assets are starting to move them off there books. As earnings stabilize and replenish the losses from real estate losses, capital levels are returning to levels that will allow more lending on real estate projects.

The most troubled banks are still being closed - expect still more banks in Washington to be shut down. While this weighs on the market in the short term, ultimately it is necessary for a healthy return to more sustainable times in the long run.

This process will take many months, if not years, to completely run its course. However, the local community banks and many of the national banks tell us they have money to lend on the right projects backed by the right borrower. This means skin in the game and projects that are priced right. Gone are the days with no money down and betting on the come. Bankers want to see real security in real estate deals. For those projects that can demonstrate it, we are seeing money readily available to borrow.

The most attractive projects for lenders continue to be the owner-occupied deals. Not only are these consider lower risk of default, they also are eligible for government loan programs that further mitigate a bank’s risk.

Programs like the Small Business Administration loans and USDA loan guarantees have been used extensively in our marketplace over the last 12 months on commercial real estate projects. We have reported on these programs in the past, but suffice it to say if you are in the market it is worth speaking with your lender about how these programs might work for your project.