In the January 2018 Senior Loan Officer Opinion Survey (SLOOS), released by the Federal Reserve earlier this month, we received a snapshot of Q4 credit standards among businesses. This report focuses on supply side reporting of credit dynamics. While banks reportedly continued to ease standards on commercial and industrial (C&I) loans, demand for such loans has picked-up slightly after remaining weak for more than a year. Increased demand is likely attributable to the rise in business fixed investment, specifically the surge in capital spending in the second half of 2017. With equipment spending up 10.8 percent and 11.4 percent in Q3 and Q4, respectively, the surge in investment likely contributed to the increased demand banks experienced for C&I loans over the period. However, increased competition among lenders was the most cited reason for an easing of credit standards, intimating that businesses have increasingly turned to alternative forms of funding to fuel capital spending.

Weaker demand for commercial real estate (CRE) loans was reported by banks, while banks continued to tighten standards on such loans. Cautious CRE lending has helped keep a fairly tight rein on the supply of credit throughout this recovery.

Common opinion today is that we’re late in the credit cycle. Both lenders and borrowers are cautious in an apparently rising interest rate environment. Determining the type of loan best suited for you and matching it with a lender who has the appetite for your specific type of loan is now more critical for successful financing … with a minimal time investment. Negotiating terms and conditions has become more significant to give you the most flexibility in managing your loan post-closing.

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Michael Green is a Commercial Loan Originator for the Counsel Mortgage Group®, LLC.

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