Non-Bank Lenders Forecast Demand Increase and Economic Downturn in 2022

BALTIMORE, Feb. 16, 2022 /PRNewswire/ -- Cerebro Capital, a commercial loan marketplace, today released its Q4 2021 survey on non-bank lending for middle-market commercial and industrial (C&I) loans. Cerebro reports commercial lenders continued to ease lending standards in 4Q21, making it easier for businesses to get loans, which has driven up loan demand in the middle-market. Looking forward, 52% of non-bank lenders expect increased loan demand to continue due to a predicted deterioration of the economy over the next six to twelve months.

Cerebro's ongoing examination of the middle-market C&I loan market includes this sixth-consecutive quarterly survey of non-bank lenders. The feedback from non-bank lenders, which includes mezzanine funds, business development companies, and venture debt lenders, private credit lenders, and alternative lenders is paired with the Federal Reserve's 4Q21 survey of commercial banks to illustrate a comprehensive perspective of middle-market financing.

Q4 2021 Middle-Market Key Findings:

• Lending Remained Borrower Friendly: Cerebro's survey reports loan terms in the middle-market continued to remain borrower friendly. 26% of non-bank lenders and 16% of commercial banks indicated they have made it easier for borrowers to get larger loans.
• Loan Demand Is Up Across All Lenders: 64% of non-bank lenders and 32% of commercial banks surveyed saw an increase in demand in Q4. Key drivers for demand for both non-bank lenders and commercial banks cited by over two-thirds of lenders included:
• M&A activity
• Increased inventory financing needs
•  Increased accounts receivable financing

How Terms Changed in Q4 2021:

• Lenders are providing larger loans: 37% of non-banks and 23% of commercial banks reported providing larger loans in Q4 than compared to Q3.
• Spreads over costs of funds lowered: 26% of non-banks and 42% of commercial banks reported spreads over costs of funds lowering in Q4.
• Loan Covenants have gotten more relaxed: 15% of non-banks and 13% of commercial banks report relaxing loan covenants compared to the quarter prior.

See the full non-bank lending survey results for additional insights.

Non-Bank Lending's Outlook on the Economy in 2022

Easing lending standards may not continue, as results were split on if non-bank lenders anticipate tightening or loosening of standards in the next 6-12 months. 27% of non-bank lenders anticipate lending standards will tighten over the next 6-12 months. This is up from last quarter.

On the other hand, 25% of non-bank lenders expect lending standards to continue to ease this year. Out of this 25%, a resounding 95% of these respondents expect this to be attributed to an increased tolerance for risk among non-bank lenders.

According to Matt Bjonerud, CEO of Cerebro Capital, "Should the economy take a turn in 2022, non-bank lenders expect their risk tolerance to set them apart from commercial bank lenders. The rebounding pandemic economy and trend of easing standards among lenders cannot last forever; and non-bank lenders will create attractive options for those in the middle-market who need capital." 

About Cerebro Capital: Cerebro Capital was started in 2017 to help democratize access to debt capital for middle-market companies. Cerebro has grown rapidly since its inception and today works with thousands of borrowers to connect them to lenders from over 1,500 lending institutions to provide credit and loans up to $100 million. As its customer base continues to expand, Cerebro is using its insights to help lenders customize and develop their loan programs to meet unmet demand. Working with finance and technology experts, Cerebro has created a holistic corporate loan sourcing and placement solution designed to revolutionize the way borrowers, lenders, intermediaries, and stakeholders manage commercial debt. To learn more about Cerebro, please visit, https://www.cerebrocapital.com/.

SOURCE Cerebro Capital / Finn Partners