First-tier lenders regaining appetite for commercial loans

Mr Johnson said that over the past three years, commercial loan applications had been “constantly falling outside” the risk appetite of established banks and into the hands of second-tier lenders.  

“[Deals] were sitting outside of what the banks were happy to write and were sitting at that next tier down from the banks at slightly higher pricing, [a] slightly higher risk curve, and more relaxed lending conditions,” he said.

However, the Sydney-based broker observed that over the past six to eight months, deals have increasingly started to “fall back within the bank appetites”. 

“There wasn’t necessarily one thing bringing them all [back], and I don’t necessarily think it was the banks going back out there looking for more business – although there’s an element of that – but we just found that a lot more clients were sitting back within what a bank was willing to write,” he continued.

Mr Johnson largely attributed the rise in demand for commercial loans from first-tier lenders to the broader rebound in the property market, which he said has triggered a rise in pre-sale volumes for developers.

“In the construction segment, [what] we’ve found is that with the improving residential markets, particularly in Sydney and Melbourne, is that pre-sales for developers have started to come back a bit more,” Mr Johnson added.

“[I] think that was something that was taking a lot of deals outside of banks for the last couple of years, where they wanted maybe 100 per cent debt cover with pre-sales, whereas the non-banks were happy to take a lower level of pre-sale cover.”

According to Mr Johnson, the resurgent appetite for commercial loans among established banks would produce better outcomes for borrowers.  

“It shows that for borrowers, if we can access major banks more often than not, they’re going to get cheaper funding and a lower interest cost, provided the terms are right,” he said.

“For developers, if they can get those pre-sales away, it means they can access cheaper funding and allow them to make more money on their project.”

The observation comes as major bank, CBA, announces additional resources to commercial loans in a bid to help small businesses access finance.

To hear more from Matthew Johnson, tune in to The Adviser’s Elite Broker podcast.

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