Just what can we expect from the world of Banking as we moved into mid March 2010 with an election looming and no real signs of the economy moving to a more positive recovery from the recession, or down turn in the market as our government would prefer to call it.
For those looking for commercial finance on commercial property
There are no major changes in the attitude to lending from most of the UK lenders but there are small changes in lending terms which might suggest that a tiny thaw in the Ice flow is happening.
The first change was a slight move by some commercial mortgage lenders to talk about 80% LTV on a purchase for their own occupation rather than the 75% which has almost become the norm for the market in commercial lending. There is certainly no rush by lenders to move to 80% LTV and most lenders are sticking to 75% LTV as they feel far more comfortable with a low loan to value which carries less risk and the credit committee are less likely to say no.
The first question that any lender will ask is do the accounts show the ability to service the level of debt. This has not changed in any small way and is unlikely to in the foreseeable future. The strength of the business to service the level of debt is paramount to any application that might find favour. Lenders are not impressed with forecasts unless the actual historical accounts evidence the level of profit required to service the debt.
This may sound harsh as there maybe very good reasons why the historical accounts show a low level of profit and the forecast shows an accurate and profitable future. If this is the case expect to see the loan to value drop down to a level the lender feels comfortable with and being requested to provide other acceptable security as a make weight to bring down the risk to a much lower level.
On a positive note some lenders are being a little more flexible with their margins, and although they will always quote their MATRIX you have some room for manoeuvre if the case is low loan to value or is a large loan or both. We should also look at what other areas we have some leverage in. Does the client wish to move their day to day banking to the lender, do they require an overdraft, merchant services, factoring or invoice discounting. All of these services earn the bank a good and healthy income which we should use to our clients advantage.
We need to be aware of the whole picture when we are trying to negotiate terms for our client because if our client is likely to need any or all of these services we should be selling them to the lender and using the additional income stream to get a more competitive deal for our clients.
There are still some areas of the current market that commercial mortgage lenders do not want to receive a greater exposure to in today's very difficult market and anything in the leisure industry will be looked at very carefully as this sector has been hit very hard by the downturn. The other sector that is not flavour of the month is development finance, where even existing clients with a good and proven track record finding that the bank manger is on a long holiday.
It is a changing market and we must stay positive it will get better but presentation is still a key factor to a successful application for a commercial mortgage, commercial finance or a business loan.