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on-bank lenders have become a crucial source of debt in periods of tight liquidity. Following the Great Financial Crisis, they filled the gap left by banks in the commercial real estate market. Today, excluding commercial banks and agency loans, non-bank lenders hold 40% of the over $4.65 trillion in outstanding US commercial/multifamily mortgage debt.
A recent survey by Altus Group reveals key differences in borrower sentiment between bank and non-bank borrowers (NBBs). NBBs are more pessimistic and dissatisfied than their peers who secure financing from banks. They rate their overall satisfaction with lenders lower, at 7.5 out of 10, compared to bank borrowers' 8.3.
Non-bank borrowers value personalized service and flexibility when working with non-bank lenders. CMBS and insurance company lenders are preferred for their greater customization and flexibility. Despite going through fewer steps in the lending process, NBBs often experience longer closing times, taking 1-3 months to complete a typical deal.
Borrowers identify macroeconomic concerns, such as economic downturn or interest rate increases, as top worries for accessing funding over the next two years. Non-bank borrowers are more likely to express concerns about regulatory requirements and counterparty risks.
To mitigate future risks, both bank and non-bank borrowers plan to increase lender diversification and asset diversification. Non-bank borrowers also expect to leverage advanced technologies and data solutions, such as big data and automation, to overcome near-term challenges.
As traditional lending channels tighten, non-bank lenders offer tailored solutions and agility, but come with their own set of challenges. Lenders can differentiate themselves by addressing these pain points and strengthening borrower relationships.
