A 525% increase in interest rates over 17 months tends to have ripple effects. One of those is the long exposure many banks have to fixed-income and commercial real estate. While 2023 revealed, those most exposed to poorly hedged bond positions, commercial real estate lurks mysteriously on bank balance sheets in 2024 and for the road ahead. The result is credit tightening, and it didn’t take long to impact commercial equipment finance.
When liquidity is under pressure, banks tighten lending conditions in favor of deposit gathering. As an example, Key Bank, a longtime leader in the vendor finance landscape, announced its refocus on bank clientele and away from vendor segments. The Fed’s own data on credit tightening to small firms further illustrate this.
Vendors are feeling the pullback. Recent research shows 86% of vendors reporting tighter credit conditions as banks pull back.
“In over 25 years, I’ve never been more open to new finance partners than I am right now.”
VP, General Sales Manager
Regional Construction Equipment Dealer
Brokers are well-positioned to fill the funding void. With more flexibility and a commitment to small-ticket funding being increasingly vacated, focusing on a few key fundamentals could help brokers earn vendor business while many banks pull back.
In times of concern, there is always opportunity. With a little focus on the fundamentals, brokers might be able to take their unfair share of vendor business once deemed off-limits.
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