Its been a long time and I Apologies!

April 16, 2008 was my last post. Since that date, much has change in the commercial loan market and myself. One of the things that I've come to realize is that real estate investors and commercial business owners need more help than ever before with finding financing.

Abandoning these two important economic gas petals to the economy is not the right answer. Hiding behind a tough if not impossible commercial loan market is not the answer. I apologize for using these excuses as a way out of finding hard fought solutions for customers and prospects. You deserve better.

Now that I have that off my chest. The Commercial Loan Market is more strained and declining than the media is letting on. I laughed in a way that hid my nerves when I read recent news articles by local institutions such as the CBIA, and the SBA. Those two articles suggested that lending standards have not been tightened and in fact the Bankers polled in the articles suggested that they see customers and prospects being more cautious about future business expectations and therefore are postponing capital expansion. Sure, its not their fault, its the business owners not asking for loans!!!

Well I'd like for them to meet a successful owner of a insurance agency (been in the insurance business for over 30 years) in Hartford County who was looking to refinance an adjustable rate mortgage on her building. A mortgage rate that was adjusting to upwards to 13% as of this post. This person's credit was ok, not great, but enough to show that this person could handle their obligations. As of right now, this person who has a successful business and good personal credit can't find a loan to help the business stay competitive. The owner is approaching the point of laying of customer support staff because of the rising mortgage payment.

I'd like for them to meet the owner of an auto painting shop who has good credit, and has been in business for over 15 years and is an institution in his community. Finding a lender to refinancing him out of a hard money loan currently paying 12% has been impossible. This owner is worried about the current lender foreclosing on his property because the loan has matured. Each month his current lender charges the owner a $4,800 fee for not paying of the loan. All the lenders solicited to look at this loan avoided this loan like the plague. He employs six full time mechanics that he might have to lay-off because of his financial situation.

I'd like for them to meet a young entrepreneur that owns three commercial properties on a main street in a busy town. He owns a robust service business and his credit has been damaged by a dishonest residential loan broker who convinced this person that his personal mortgage refinance was going to close soon so don't pay your current mortgage. Well that is financial disaster for your credit report. Two of the commercial properties were leased out and cash flow positive. He wanted money for the third to bring it up to code so he can lease it out. He was asking a low Loan to Value on the properties that were already leased and cash flow positive. No dice. Lenders look for any excuse to say no - often times taking months to finally say no. They look at the personal credit and walked away. There so many reasons to justify the loan, but they needed only one to decline the loan.

Large borrowers aren't immune to what's going on. I've gotten calls from many of my old banking customers telling me that their banks are no longer funding capital expenditures required for future growth or required cost savings. Many of these companies employee well over 200 each. The lack of financing has further caused a business contraction and potential lay-offs.

So don't tell me that the credit crunch hasn't hit main street. I'm sure the business owners mentioned above where not asked in the polling conducted by these media institutions. I have an idea. Speak these business owners after they have to lay-off productive, important people because they are trying to meet their current loan payment that increases 15% a month.

The credit crunch is real, its here, and won't be gone for a long time. I know a lot of bankers that are telling me privately that their Bank's have posted "Closed for the Summer and Winter" signs on the Commercial Lending departments. Let's hope they might be open for the spring!

"Is it the beginning of the end or the end of the beginning."

An article in Monday's Financial Times titled "The beginning of the end or the end of the beginning" filled me with enthusiasm that we were approaching the end of the "Credit Crisis". The author pointed to the market's gain since the Fed's bailout of Bear Stearns as the benchmark event that was the tipping point towards a bright future.

The author must of performed a gut check when GE shocked the market on Friday. Not only did GE's earnings debacle create concern regarding the health of the US economy (given GE's product diversification), but the write-downs in GE Capital and other Real Estate business lines reminded many that the credit crisis was still around. After deep thought the author published the article on Monday, perhaps I would have done the same.

On Monday, it was announced that Wachovia needed a $7 billion capital infusion due to write-downs and an unexpectedly worse US economy. This announcement came on the heels of Washington Mutual's $7 billion capital infusion by a private equity firm.

Wachovia's announcement peaked my interests because much of the capital infusion went to build capital reserves against a failing US economy. While the US economy was heading towards little to no growth projections prior to the credit crisis hitting the financial markets, the almost collapse of the banking system could mark the next phase of the credit turmoil: The Credit Crunch Phase.

Financial institutions can shore up capital ratios by injecting capital to the business and/or restricting lending. Withholding credit pinches the checkbooks of many main street businesses. Business owners then look to pare payrolls, shelve capital expenditures plans, and reduce other employee benefits (higher health care deductibles. This circular equation puts the economy in a precarious situation and could ultimately lead to a prolonged recession.

The point is with many financial stocks reporting earnings this week, we should get a glimpse into the health of the US financial system. J.P Morgan, Merril Lynch and Citigroup all report earnings this week with more to follow next week. Watch and read carefully the earnings reports and watch for signs of credit restrictions and dire predictions for the US economy. Pay close attention to the smaller regional banks that so far have been hidding behind the headlines.

So only after this and next week will we know if it's the beginning of the end or the end of the beginning.