Intense competition in middle market lending benefits commercial borrowers

Cerebro’s analysis of the mid-market commercial and industrial loan market includes its quarterly survey and the Federal Reserve Quarterly Survey of Commercial Banks. In doing so, Cerebro provides a complete picture of business loans to middle market borrowers, as well as the outlook for the next six months.

Cerebro launched its investigation in the second half of 2020, making it the fourth consecutive investigation providing information on the $ 3 billion credit market to alternative lenders that compete with commercial banks for businesses. Participants include CEOs and Vice Presidents who manage loans in private and mezzanine credit funds and business development spaces. These lenders work with middle market borrowers and offer loan amounts ranging from $ 2 million and $ 100 million.

Loans require ease for larger loans

The Cerebro survey reports that credit standards have become more favorable to borrowers, with 36% of lenders saying they have relaxed the standards in the past three months. With a jump from 1Q21, which announced 28% of credit easing, the market continues to follow its uptrend as lenders expect their capitalization to improve.

The market is also showing signs of marked economic improvement, as COVID-19 vaccines have been distributed and have led to a sharp drop in the number of deaths since the start of 2021. Additionally, nearly 60% of lenders reported that the increased competition from other lenders was an important factor. to relax the standards in the last three months.

Commercial loan applications on the rise

Almost 70% of lenders reported an increase in demand for credit compared to the previous quarter. Responses from lenders with increased demand indicate that the top two reasons for questions about new loans were due to mergers and acquisitions (91% said this was a significant factor) or because other sources of capital were less attractive.

In 1Q21, 27% of non-bank lenders indicated that mergers and acquisitions were not a significant driver of demand for them; however, in 2Q21, that number fell to 9%. Borrowers looking for better terms on their principal continued to be a big driver quarter over quarter, with 70% of lenders indicating this is a big reason they saw more transaction flow.

Prospects for borrowers Positive trends

28% of lenders expect larger loans to become even easier to obtain over the next six months and they also expect rates and terms to continue improving for borrowers facing competition from other lenders. 94% of lenders surveyed who plan to relax standards plan to do so in response to increased competition from lenders, which is a 10% increase from the previous quarter. The expected improvement in a lender’s loan portfolio along with increased risk tolerance were the second most important reasons for the ability to relax credit standards with 65% and over 80% of response from lenders, respectively.

“We continue to see loan terms improve as demand and competition from other lenders increase. To get more loans, lenders have made concessions on loan terms due to reduced risk. borrower industry, improved liquidity position and increased risk tolerance, “said Matthieu Bjonerud, CEO of Cerebro Capital. “Hungry lenders and greedy borrowers are creating a market of choice that will continue into the third quarter. “

Cerebro’s network of more than 800 lenders is split equally between commercial banks and non-bank lending institutions. With such a large network of lenders, Cerebro offers mid-market businesses a data-driven approach to navigate hundreds of commercial and non-bank bank lenders. Download raw data for additional information.

About Cerebro Capital: Powered by more than 800 commercial banks and non-bank lending institutions, Cerebro Capital (“Cerebro”) is a data-driven platform specifically designed to democratize access to credit markets by connecting corporate borrowers and lenders to find and take out business loans ranging from $ 2 million To $ 100 million. Working with financial and technology experts, Cerebro has created a comprehensive business loan management solution designed to revolutionize the way borrowers, lenders, intermediaries and stakeholders manage corporate debt. To learn more about Cerebro, please visit https://www.cerebrocapital.com/.

SOURCE Cerebro Capital

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