Our monthly Construction Finance Market SnapShot will provide a brief overview of the general state of the Construction Finance Market nationally.
During May, we have generally seen that the Major Banks continue to have a reduced appetite for Construction Finance.
This has created a gap in the market for the past 12 – 18 months, since there are still some good projects out there that need to be funded.
The Non-Bank sector has been very successful in filling that gap for debt pieces up to $5 million and less successful in filling the gap for debt pieces greater than $5 million.
Recently we have seen movement in the “above $5 million” space, where some of the traditional “up to $5 million” players are clubbing together and doing deals greater than $5 million and up to $15 or even $20 million.
We have also seen an influx of overseas money towards some of the proven non-bank providers that enables those non-banks to do transactions of up to $125 million at a cost that would very much compare to a funding model of a traditional bank with mezzanine added on top.
So in summary, the banks continue to do very little and, therefore, we are seeing the non-bank sector increasingly stepping up and filling the gap.