Most people remember the line, “Show me the money!” from Tom Cruise’s 1996 hit movie, Jerry Maguire. Today, when trying to get a lender to “show you the money,” you will likely receive a blank stare, a gigantic pile of paperwork to complete, or a simple, “I’m sorry, we can’t help you.”
As Hendrith Vanlon Smith Jr., managing partner of Mayflower-Plymouth Capital writes, “Ideas without capital are like seeds without soil. It’s capital that turns business potential into business productivity.” Obviously, it is paramount for business growth. While we are in a difficult commercial lending market, if you need to raise capital, let me encourage you with some of Abraham Lincoln’s timeless wisdom, “Let no feeling of discouragement prey upon you, and in the end, you are sure to succeed.”
Whether you are a borrower or a lender, it is indeed a wild ride! Rates have jumped beyond what they were five years ago. Almost $955 Billion in loans will mature this year and require refinancing. Many are already labeled “NPL” (nonperforming loan) and are likely to default. The values of many underlying commercial assets could decrease. As a result of these factors, lenders may well lend less money because they are preserving capital to cover potential losses and face tighter governmental controls.
However, there are some bright spots in commercial lending. Mary Dimm, director of marketing for Landmark Commercial Realty in Harrisburg, Pennsylvania, wrote in March, “According to a recent CoStar article by Mark Heschmeyer, the Mortgage Bankers Association (MBA) is projecting a significant rise in commercial property lending this year, following a robust fourth quarter in 2024. Mortgage originations for commercial and multifamily properties surged 84% year-over-year and 30% quarter-over-quarter, leading MBA to forecast a 16% increase in total lending to $583 billion in 2025.”
One of the keys to navigating the current commercial lending market is to assemble a great team to assist you in pursuing the best funding opportunities. These opportunities could include alternative funding avenues such as Crowdfunding, vendor financing(vendors financing purchases over time to improve cash flow), strategic partnerships, licensing and royalties, customer pre-sales, invoice factoring (selling discounted invoices to a third party to improve cash flow), and seeking private lenders.