The 2007-2008 financial crisis rejuvenated non-bank, alternative lenders in commercial real estate. In a time when credit and liquidity requirements restrained banks, experienced financial professionals found creative solutions to circumvent traditional banking regulations. Consequently, the alternative financier became a viable capital source when banks were hesitant to loan despite quantitative easing policy and interest rates below one percent.
Another strength of alternative lenders is their ability to hone their specialization. They don’t have to be massive, all-capable banks. Instead, they can be lean, mean lending machines with expertise in a particular region, asset class, financing maneuver, etc. Their ability to compete with the banks comes from the growing popularity of capital sourcing.
Alternative lender money comes from family offices, insurance companies, pension funds and high-net-worth individuals looking to invest with seasoned professionals. Their exponential growth over the past 15 years comes from trust in these systems, their strategy to borrow and lend long, as well as recruiting talent from top business programs and other financial institutions. The debt fund business model is far more flexible in an environment where bank runs are a scary reality that can happen overnight.
This is not to say that banks are inadequate and not a viable option. The banking system is still impressively robust. However, it is important to note the growing importance of alternative lenders.
BayBridge Real Estate Capital works with a wide range of lenders to source and secure financing for clients. We have a reliable and trusted network of relationships with traditional and flexible capital sources that allow us to find creative solutions in any market.