Magazine article American Banker

Lenders Tighten Terms on Midsize Commercial Loans

Magazine article American Banker

Lenders Tighten Terms on Midsize Commercial Loans

Article excerpt

Big loans are not the only ones getting extra scrutiny these days.

In the latest quarterly lending survey by Phoenix Management Services, middle-market lenders, citing weakening economic conditions, said they planned to tighten loan structures -- including collateral requirements, guarantees, and covenants -- for credits bigger than $6 million.

The results reinforce findings by the Federal Reserve Board that were published this week. The Fed's survey of senior loan officers found that banks are tightening lending standards at the fastest pace in a decade and that lenders are charging more to extend credit to riskier borrowers.

The Phoenix survey, done in the fourth quarter by the Philadelphia consulting firm, said 53% of lenders planned to tighten standards on loans of $6 million to $10 million in the first quarter and 55% said they would tighten standards on loans bigger than $10 million. Standards for smaller loans would remain the same as in the fourth quarter, according to the survey.

That said, smaller loans would have higher interest spreads. Fifty-one percent of survey respondents said they planned to increase the spreads they get for loans of less than $5 million.

Phoenix contacted 82 financial institutions by mail for the survey -- 42 commercial banks and 40 commercial finance companies or other commercial lenders.

Not surprisingly, 94% of respondents said they expected loan losses to grow in the first six months of 2001, and 91% said they expected bankruptcies to rise. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.