Happy Holidays from the Team at CLX.  We Hope Your Holidays Are Filled With Love, Peace & Happiness.

2023 - One Wild Ride

What a rollercoaster of a year 2023 has been.  So much has happened in the commercial financing world it is hard to summarize it all.  Now that we are in the final days of December, we hope to bring some perspective to what has certainly been a crazy year in the banking world and set some expectations for 2024.

The Outlook for 2024

• We do believe the Federal Reserve will lower interest rates next year, and that will bring down short-term interest rates tied to the Prime rate.  

• We anticipate credit will start to loosen up at the start of 2024 due to the general need to grow and make money most Banks have.  However, we believe credit will remain tight for lending categories and property types that are deemed higher risk, especially in the case of a recession, such as office and retail properties.  

• Although we believe there will be some decline in longer-term fixed interest rates as the Federal Reserve lowers interest rates, due to the fact the yield curve is still inverted (short-term interest rates are substantially higher than long-term interest rates), we are less confident that longer-term interest rates will come down as quickly as short-term interest rates.  If Banks continue to struggle to maintain deposit balances, that would also cause long-term interest rates to stay higher as Banks are forced to pay more for deposits.

• It does appear there are some economic headwinds that could impact the economy in 2024.  Also, the fact 2024 is a Presidential election year, will likely play a role in economic activity in 2024.  Even if there is a recession, we do not anticipate it will be deep and it does appear the economy is still humming along.  

For CLX

• 2023 was a strong year for CLX as we continued to see loan demand growth.  We got 75 loans approved for a total loan volume of $166 million, with still many loans to close in 2023 and early 2024. 

• Here at CLX we released our updated process, (shown below) to educate the market on exactly how we work here at CLX.  

• In 2023 we launched our video series with interviews and informational videos on commercial loans and lending, and we are excited to announce we will be greatly expanding our videos and educational material in 2024. 

Banking Pressures in 2023

• Pressure on interest rates started early in 2023 with the first Federal Reserve rate increase on February 1st, 2023 and three more increases throughout 2023  culminating in a 1.00% increase in the Prime Rate bringing it to 8.50%, the highest the Prime Rate has been since February 1st, 2001. 

• Pressure on the Banking industry was substantial in 2023 as the Federal Reserve rate increases greatly impacted the value of securities held on the books of most US Banks.  As asset values fell at several large Banks, Bank liquidity became a problem causing mounting concerns that those Banks may fail.  That concern led to deposit runs at two of those banks, Silicon Valley Bank and Signature Bank, both of which failed in March of 2023.  They represented the third and fourth largest bank failures in U.S. history.  

• First Republic Bank Bank became the 2nd largest Bank failure in US history in May of 2023 as it could not recover from damage caused by lost deposits and investment portfolio performance.   

SBA Lending - The New Standard Operating Procedure Updated

As of August 1st, 2023 the new Standard Operating Procedure (“SOP”) for SBA lending (Small Business Administration Loan Programs) went into effect, and there was an update that went into effect on 11/15/23 that further clarified many of the changes already included in the August update.  Below is a link to a summary of some of the largest and most impactful changes to the program guidelines. 

Key Lending Programs to Consider:

SBA 7A Loans – whether buying a business, buying 51% or more owner-occupied commercial properties, starting a business, needing capital to expand your business, needing funding to refinance existing 51% or more owner-occupied commercial properties, refinance other business debt, or a combination of any of the above, SBA 7A loans can present a great solution for you.  With 10-year loan terms for business debt, 25-year loan terms for real estate debt, and blended loan terms between 10 and 25 years for debt that is a combination of both owner-occupied commercial property debt and business debt, SBA 7A loans provide long-term amortizations reducing monthly debt service.  SBA 7A loans can be used to consolidate existing debt and reduce monthly payments, while also getting additional capital to operate your business.  Also, SBA 7A loans do not need to be fully collateralized by hard collateral and typically they come without any loan covenants (future conditions to hit like a debt service coverage ratio).  For businesses that are struggling to hit existing debt service coverage ratios at their existing banks, sometimes a restructure into an SBA 7A loan will help them qualify by extending out the payments into a longer amortization.  For Borrowers who are short the collateral to support existing debt obligations, the SBA can step in without being fully collateralized and provide the capital necessary to refinance debt or expand without being fully collateralized so long as the cash flow is there to support the loan based on SBA amortization schedules.  

SBA 504 Property Acquisition and Refinance Loans – Utilizing the SBA 504 loan program, you can now qualify to purchase or refinance 51% or more owner-occupied commercial properties and existing business equipment debt into long-term fixed rates via the SBA 504 program, including refinancing other existing government guaranteed debt such as existing SBA 504 loans and SBA 7A loans.  You can secure 10-year fixed rates on equipment and 20 to 25-year fixed rates on 51% or more owner-occupied real estate with interest rates below 3.00% today.  In some cases, you can even take cash out up to 85% of value to cover other business-related debt, and with no cash out can refinance up to 90% of value.  

Conventional Bank Property Acquisition or Refinance Loans – We still have many Banks and Credit Unions being aggressive in the financing they are willing to provide for acquiring or refinancing owner-occupied commercial properties or acquiring or refinancing commercial investment properties (retail, office, industrial, etc.).  We are still getting loans done with fixed interest rates starting in the mid 3.00% range, and are not only getting 5-year balloons done but also 7-year and 10-year balloons as well as some 5, 7, and 10-year ARM mortgages done as well (where the loan is fixed for 5, 7, or 10-years with the rate adjusting every 1, 5, 7, or 10 years after the initial fixed rate period for another fixed rate term), with an entire loan term of 20 to 25 years. 

Become a CLX Referral Partner

Do you have customers in need of commercial financing and you do not know how to help them?  Here at CLX we offer several programs in which you can become a referral partner and earn commissions on opportunities you run across.  You can be involved as little as providing us with a name and phone number.  Or if you prefer, you can help manage the client through the entire lending process.  We have many training tools and marketing materials available to us to help you grow your own client base.  Please contact us directly at info@commerciallendingx.com if you are interested in learning more about referring business to CLX.  

About Commercial Lending X

CLX is a small business that specializes in helping other business owners get the business loans and financing they need to be successful.  To learn more about CLX and the services we provide please check out our website at www.commerciallendingx.com.  You can also contact us directly at info@commerciallendingx.com or via phone at 888-975-0007.