• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Canada
  • United Kingdom
  • Subscribe
  • facebook
  • instagram
  • RSS
  • RSMUS.com

The Real Economy Blog

Search

  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences
Home > Coronavirus > As demand for commercial loans rises, so do underwriting standards

As demand for commercial loans rises, so do underwriting standards

May. 18, 2020 by Brandon Koeser

  • email
  • Twitter
  • Facebook
  • Linkedin

The growing uncertainty surrounding the coronavirus pandemic has created a surge in demand for financing from commercial firms, according to the latest Federal Reserve Senior Loan Officer Survey and to proprietary research recently released by RSM.

The Fed’s survey showed that demand for loans from large and medium-size firms, as well as small firms, increased during the early weeks of the pandemic.

Further data reported by the Fed showed that commercial firms tapped into their banks for liquidity well in advance of the launch of government-backed liquidity programs included in the CARES Act.

The increase in demand is also reflected in the latest results from the second-quarter Middle Market Business Index, which indicate that an increasing number of respondents either sought special financing during the survey period or are planning to seek special financing over the next six months.

This was especially true in the smaller end of the middle market, or companies with $10 million to just under $50 million in annual revenue. Of those companies, 54% said they had sought special financing to ensure liquidity, and 43% planned to see such financing.

For the larger companies in the middle market, or those with $50 million to $1 billion in annual revenue, the figures were 34% and 28%, respectively.

The results were based on a random survey of 416 senior executives, conducted from April 8 to April 23, including respondents in manufacturing, retail, technology and fintech.

Fueling the uncertainty is how long the pandemic will last and whether government-backed liquidity programs will be enough to support businesses that have essentially been shut down since mid-March. The longer it takes for the economy to recover, the more likely that businesses will continue to need additional liquidity.

The challenge may then become, how willing will my bank be to lend to my company given how bad things have become?

The takeaway

The growing pressure on businesses is unlikely to subside soon. Although the prospects of a bank becoming more reluctant to lend are scary to a business stakeholder, one must remember that it is much more likely the bank will work with a borrower during such an uncertain time to weather the storm.

Read the full second quarter MMBI Q2 report, and visit RSM’s Coronavirus Resource Center.

  • email
  • Twitter
  • Facebook
  • Linkedin

Related posts

  • Declining demand for commercial loans points to continued uncertainty

    Demand for commercial loans softened dramatically in the third quarter, the Federal Reserve Bank of New York reported, signaling that businesses continue to be cautious amid simmering trade tensions and slowing economic growth.

  • Construction sector uncertainty shows up in labor, loans and demand data

    Slow and uncertain—that is the state of the construction ecosystem right now. The unstable environment for builders has resulted in huge layoffs for their workforce and a disproportionate amount of loans taken under a new SBA lending relief…

  • Fed and Treasury create Commercial Paper Funding Facility to ease credit stress

    The U.S. Treasury on Tuesday granted the Federal Reserve 13(3) authority under Dodd-Frank that permits the central bank to take steps under exigent and unusual circumstances to stabilize financial markets and the economy.

Filed Under: Coronavirus, Financial Services Tagged With: commercial loans, coronavirus, Covid-19, MMBI, RSM Middle Market Business Index

About Brandon Koeser

@brandonkoeser

Brandon Koeser is a senior manager at RSM US. In May 2019, he was selected as a senior analyst in RSM’s cutting-edge Industry Eminence Program, which positions its senior analysts to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. Koeser's focus is on the financial services industry.

Primary Sidebar

Other Regions

  • Canada
  • United Kingdom

Categories

  • Economics
  • Technology
  • Consumer Products
  • Industrials
  • Financial Services
  • Real Estate
  • Health Care
  • Life Sciences

Recent Finance articles

Low interest rates offer private equity firms a rare opportunity to invest

Feb. 25, 2021

CHART OF THE DAY: ESG comes to financial services

Feb. 25, 2021

Private equity and venture capital stay resilient in the EU and UK

Feb. 17, 2021

RSMUS.com links

The Real Economy

Middle Market Business Index

MMBI Special Reports

Footer

  • Facebook
  • Instagram
  • RSS

About The Real Economy Blog

The Real Economy Blog from RSM US LLP was developed to provide timely economic insights about the middle market economy. It is offered as a complement to RSM’s macroeconomic thought leadership, including The Real Economy monthly publication and the proprietary RSM US Middle Market Business Index (MMBI).

© 2021 RSMUS.com | Privacy Policy | Cookie Policy

The Real Economy Blog
  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences