Caution surrounds commercial bank lending
On the lending front we continue to see a cautious approach taken by lenders in assessing transactions. While credit appetites, and capacity to lend, has improved since the Lockdown, many lenders remain more selective on new customer transactions. In some instances we are having to work harder across our pool of funding partners to find the right funding solution for our clients. David Hargreaves hopes the banks won't be too guarded with their lending because of preconceived expectations of what will happen with the economy - rather than just seeing what does happen. The commentary within this article https://www.interest.co.nz/opinion/106058/david-hargreaves-hopes-banks-wont-be-too-guarded-their-lending-because-preconceived fits with what we are seeing in the wider market. Commercial bank lending activity is more cautious, particularly for new to bank opportunities. The major banks will do new to bank commercial deals for good businesses, but it is important to provide well-presented and forward looking business cases, and land them on the right desk, to get funding approvals from the major banks.
First and second tier non-bank lenders in property, asset finance, and working capital have mostly normalised their lending practices to pre-Covid-19 levels, although good levels of equity and experience are needed in the property development space. Encouragingly, feedback from our client base supports the comments within this article that economic activity in most sectors has bounced back better than expected following lockdown – indeed many people are spending. During July many of the three-month interest only debt relief packages that were provided early in lockdown rolled off. As it has turned out, very few of our clients have required extensions, interest only or payment relief, and those that have done so have generally required these for industry or customer specific reasons, not because of a wholesale economic slump. This is a good sign that most businesses are trading well enough to resume their normal repayment debt commitments. We continue to be well supported in terms of options for obtaining funding for our clients, and are positive about the increased activity we are seeing.