Bank Lending Delays: COVID-19 Impact

The Coronavirus Pandemic has affected small businesses nationwide. As SBA loans have been granted for existing customers there have been significant delays for new businesses in getting the financing they need while the banks are overloaded. 

Jamie Woodwell, head of commercial research at the Mortgage Bankers Association, said in a statement that any momentum from originations in 2019 was “halted by the spread of the coronavirus” due to a slowdown in demand from borrowers and the difficulty underwriting and funding the loans from lenders.

BANKS WARN OF ‘OVERWHELMING’ DEMAND AND MESSY START FOR SMALL BUSINESS LOANS, CAUSING A DRAMATIC EFFECT ON COMMERCIAL REAL ESTATE LOANS.

This has had  a “spill over effect” on all loans including real estate deals from construction to perm, purchase and re-financing. 

“The response is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, the chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”

Paycheck Protection Program

The Paycheck Protection Program is a major component of the efforts to blunt the economic effects of the coronavirus, which has been especially devastating for small businesses. It is meant to offer loans for small businesses totaling up to $10 million at very low rates. Borrowers get an interest rate of just one percent and can have the loan entirely repaid if they keep paying their employees.

Under PPP private banks handle the work of accepting applications, evaluating borrowers’ needs, setting the precise terms of the loan, and transferring the cash. The SBA and Treasury Department are responsible for approving lenders and establishing the rules.

This is causing a massive workload for banks, as quoted in the New York Times, 

Jim Donnelly, the chief commercial officer of Bangor Savings Bank in Maine, said his small staff was working around the clock to accommodate the pent-up demand. In a typical year, his bank handles hundreds of business loans. He expects to process thousands in the coming months.

Overcoming COVID-19 Bank Lending Delays: The Liquidity Source Can Help

Our financial experts are available to do Virtual Consultations to discuss your commercial  funding needs on all real estate type loans.  While many banks are feeling the effects of COVID-19, they may not be able to take on new lending responsibilities due to the overload of PPP/SBA lending responsibilities. We have established relationships with many banks around the metro NYC area, and are here to help every step of the loan process. The Liquidity Source prides itself on taking the time to customize the process for each individual business it works with on commercial real estate.  


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