By Ashley Gunn
According to a recent article published in the September issue of the Scotsman Guide, nonbank lenders are growing in popularity, making them more competitive against traditional bank lenders. The article claims that commercial mortgage brokers — who are knowledgeable about private, nonbank lending — will be best positioned to take advantage of this growing industry.
“Private lenders are no longer the questionable hard money lenders of a decade ago, when private money was regarded in a somewhat-negative manner,” the article said. “Today’s nonbank lenders sometimes control billions of dollars of funds that are available for investment…many of them have escalated their operations and reputations to the point where they attract institutional investors on a global scale.”
Initially these private lenders were financing riskier projects that banks were unable to underwrite due to strict regulatory requirements. Successful financing of these projects has propelled private lenders into this niche market, and wider client bases have “led to the gradual evolution of many private lenders into powerful nonbank commercial lending sources,” according to the article.
The article concluded by outlining the similarities between banks and nonbank lenders, including nearly identical transaction processes: “In many ways, qualifying for nonbank financing is as rigorous as qualifying for bank financing.”
Given these similarities, ABA is advocating for the regulatory environment to have a “level playing field” for all types of lenders. ABA recently expressed this opinion in response to the Treasury’s request for information on marketplace lending.