The traditional lending market was already tightening its belt before COVID-19 took hold in the U.S. and around the world. With interest rates plummeting and eventually hitting zero percent, there was simply no appetite – or motivation – for banks to fund loans. Now that the global pandemic has slowed down the American and global economies, this already-restricted lending activity has been reduced to effectively zero.
The initial reaction to COVID-19 was swift in the lending community. With many tenants unable to pay the bills, property owners were left struggling to pay their financing installments. Within the first days and weeks of the pandemic, borrowers were already asking lenders for workouts and modifications.
Now that we are several months into the global pandemic, it’s clear that its financial impact will be felt for years to come. This impact will reverberate through multiple sectors, including:
- Office space: Work-from-home arrangements are here to stay, whether due to ongoing stay-at-home directives or because companies find it more economical to downsize or move to flexible workspace arrangements. This is coupled with an oversupply of office space, which is an issue particularly pronounced in two regions hit hard by COVID-19: the greater New York area and Florida. The result is a surplus of assets in the current real estate market, for which it will be difficult to secure financing.
- Hospitality: COVID-19 has decimated this sector of the commercial real estate market. Hotels, attractions, and cruise line operators are just some of the industries that will take years to recover. As a result, hospitality will be a no-go zone for traditional lenders for the foreseeable future.
- Retail: Brick and mortar retail locations were already in serious decline before COVID-19 came to the U.S. The continued growth of e-commerce, coupled with shut shops and a customer aversion to going to stores during the pandemic, was the final nail in the coffin for several retailers. The result is a surplus of retail spaces – and no tenants to fill them.
Even with a suffering economy, development and redevelopment has not come to a total halt. There are still borrowers looking to fund construction, land purchases, capital improvements, and other projects. Even if their project is financially sound and holds tremendous promise, a traditional lender will likely say “no” without even closely reviewing an application. They’ll see a flagged industry like retail or office space and immediately put that application to the side.
“Simply put, traditional lenders are risk-averse, and nothing sounds riskier than lending during the biggest health crisis of the past 100 years,” said Kevin Wolfer, CEO of Kennedy Funding. “However, to broadly paint all projects with the same brush does a disservice to those that have great potential to succeed.”
For those looking to borrow during the COVID-19 crisis and its aftermath, a direct private lender can help meet your needs. A direct private lender like Kennedy Funding won’t categorically reject applications just because they don’t perfectly fit the mold of an ideal project or borrower. Even if the project is in an at risk category, we examine the merits of the deal and analyze each application on a case-by-case basis.
We can also move quickly to closing. While traditional lenders are bogged down in red tape, we can review an application and close in as little as five days. All we need is a clean title, a clean environmental report, and a current appraisal to close. This becomes critical if time is of the essence, whether you need a bridge loan to continue a project or to quickly kick-start renovations to help appeal to more customers.
Importantly, Kennedy Funding is not limited by location: we are the only direct private lender to consistently close loans successfully in other countries and continents. At Kennedy Funding, we have hands-on expertise closing loans in several foreign countries, including Mexico, Brazil, and the Caribbean. So if opportunity takes you across the border, Kennedy Funding can help.
Even as the economy continues to fluctuate – and the COVID-19 global pandemic continues to impact how we do business from day to day – a direct private lender can step in and ensure you have the funding you need to keep projects going and deals flowing. Contact Kennedy Funding to begin the application process.