Your January 2023 Commercial Lending News and Successes

Good morning to January rains,

Commercial Lending

The Business and Investor Side of Our Business

I will keep this letter short. There is little on the market side, as the overall economy continues recovering from the wide spread Co-Vid disruptions.

Good News: Energy prices are down, as we await to see the economic response to China stepping back from their no Co-Vid policy. In the meantime, this should help ease inflation. Employment: A two-edged sword. Most sectors show improvement, as supply chain disruption ease. Note dramatic drop in freight / shipping pricing. Good for the every day person wanting to work. At the same time, Federal Reserve policy is to control inflation by slowing of wage and adding fewer new jobs – the problem of excessive deficit spending.

Of importance: Santa Clara County has been listed as a disaster area. As a result, January 15 quarterly tax filings and April 15 tax filings are all extended to May 15. Note: If the preparer lives in a disaster area, all of their clients – whether in a disaster area or not – are able to utilize this same extended filing dates.

1) Interest rates: Easing about 1/2 % from the October / November high mark. This is about 1/2 % higher than the last run up late in 2018. Pretty similar, with both the 5 and 10-year Treasury rates. This helps bring perspective. Call to learn more.

2) Residential Real Estate: Locally, our market continues tricky, with continued low supply. This, even after recent years of a stellar Seller’s market. We anticipate a slow down of appreciation, awaiting meaningful softening of mortgage rates.

3) Commercial: Sales and leases are hampered by low supply and lender challenges. Key: Quality of existing leases for investment property. For an owner-occupied SBA loan, key are the company track records – 3 years of P&L’s. With talk of a troubling recession, it is important to call today. Credit committees are extra careful in examining every detail. This despite record balance sheet-to-loan. Call us. Let us help you prepare how to best navigate these choppy waters.

Outcome: These patterns should continue, as we await Spring. Good news: Inventory challenges show no sight in easing. Yet commercial, as a whole, is far more diverse, with each client needs varying considerably. Our goal is to highlight your strengths. Let’s talk.

Call us. We are here to help.

Success Stories

Retail, Restaurants and Hotels: Holding up quite well. In spite of a drop in savings rates and fears of inflation, people continue to eat out and go out. The expected declines in these sectors has not yet materialized. People are imaginative and quick to adjust.

Sector Predictions 2023: Let’s look to Thomas LaSalvia, Senior Economist with Moody’s analytics: 2023 should continue to post gains, albeit not as strong as 2022. For apartments, high residential interest rates will support this sector. For Industrial, it will continue to shine with the economic changes, structurally, in the Country. For Office and Retail, it should continue to muddle along sideways, with strong properties up, outweighing the losses of marginal properties.

The wild card: If the economy slides into Stagflation – high inflation, rising unemployment and slow economic growth.

Good news: Our commercial success is building steam. Offering flexible loans with excellent programs and great terms – plus our proven successes – keeps our phone ringing. Let’s talk. We can help.

Such is the reward of having lending partners who respect our work and attention to details. They trust our approach and loan packages. In response, we carefully strive to maintain the quality of their depository relationships. Team chemistry – a plus for our client.

You have heard me say: It starts with a first conversation. Let’s talk.

Have a joyful New Year may and it be filled with many blessings.

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