Commercial loan market is cold for some
While the temperatures have been cooler here this summer, the credit markets have been even colder across the country for the first half of the year.
Cambridge Realty Capital Cos., a real estate investment banker, reported late last month that credit was in the deep freeze for the first six months of 2009.
Jeffrey Davis, Cambridge chairman, said his firm reviewed 145 loan-origination requests that totaled $2.05 billion during the year’s first half. He said those numbers were down from the same period last year when Cambridge reviewed 174 loans for $2.7 billion.
The Federal Reserve reported that loan requests made by investors looking to buy asset-backed securities fell to $5.4 billion in July, a fall from $11.5 billion in June and $10.6 billion in May. Dan Castro of Huxley Capital Management said demand remained “very strong” in July, but talk about price “tightened on almost every deal.”
While loan requests may have cooled down, the talk about needing credit has remained a hot topic in Michigan — and not just in real estate and securities.
Amy Shaw, director of communications and education for the Michigan Manufacturers Association, said the organization has been discussing the credit issue quite a bit since the beginning of the year. At a series of regional meetings held this year, she said members told MMA President and CEO Chuck Hadden that getting credit has become more difficult than in past years and the issue is still a major concern for them.
“It’s something that we discussed quite a bit at the beginning of the year. It came up pretty high in some of our conversations that we’ve had with manufacturers where our CEO has gone around the state. We poll our members to take their pulse and figure out what is important to them, and that has consistently come in high,” said Shaw of an apparent credit freeze.
So Shaw said her organization then met with the Michigan Bankers Association.
“We said our members are telling us that they can’t get money. The bankers association said their members were saying we’ve got money to lend, but the manufacturers aren’t coming to us anymore,” she said.
Those conflicting statements led the associations to start a pilot program in June called “speed banking,” a takeoff on the speed-dating concept.
“We lined up manufacturers and banks and they had 30 minutes to get to know each other and make their case, then move on to the next one. It was just a way of speeding up that connection process, and it seemed to go pretty well,” she said.
Shaw said the first meeting was eye-opening for both sides because manufacturers and bankers had stopped talking prior to the event. Shaw said that situation was as much a problem for her members as the fact that banking rules had changed.
“They had felt extremely frustrated about the fact that there wasn’t any money for them, and they weren’t even going to try. And there are some lenders that won’t (lend): They hear manufacturing and they run away. But there are some that are willing and able and looking (to lend),” she said.
The MMA is evaluating the program and may hold more speed-banking get-togethers for its members.
The Michigan Retailers Association recently asked its members how difficult it was for them to get business loans now versus a year ago. Tom Scott, MRA senior vice president of communications and marketing, said 1.8 percent reported it was less difficult to get credit, while 34.2 percent said it was more difficult. Sixty-four percent responded that the degree of difficulty was the same as it was last year.
“Just under 2 percent said it was actually easier. So we’ve got over 34 percent saying it was harder,” he said.
“We’ve heard some comments from members saying their line of credit was being pulled or they were having trouble getting loans. It’s not universal, but when a third of the membership is saying it’s more difficult, it’s significant,” he added.
The MRA hasn’t had an opportunity yet to dig deeper to determine what action those members who found it harder to get credit are taking. But Scott said a few members remarked that they’ve had to shop for a new financial institution because a couple of the major national banks that normally gave the retailers credit told them they wouldn’t be making loans of any type to retailers for the foreseeable future.
“They’re all keeping goods on the shelves,” said Scott of his members. “But a third of them are finding it more difficult with having to find different financial institutions.”