New Survey Examines $1 Trillion Non-Bank Commercial Lending Market

BALTIMORE, Nov. 17, 2020 /PRNewswire/ -- Cerebro Capital, a commercial loan platform, today released its new quarterly survey on non-bank lending for middle-market commercial and industrial (C&I) loans. The results illustrate the perspectives of private credit lenders, also known as alternative lenders, or non-bank lending institutions.

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Non-Bank Lenders See Surging Loan Demand As Credit Standards Tighten

Non-bank lenders are changing credit standards in response to economic volatility, with 49% of respondents indicating that credit standards for C&I loans tightened during the third quarter of 2020. At the same time, 76% of non-bank lenders expect loan demand to surge over the coming months as borrowers leave commercial banks in search of relaxed covenants and flexible loan structures.

Several key findings in Cerebro's survey indicate that non-bank lending institutions are continuing to strengthen their foothold in the private debt markets and will be a key resource for middle-market companies as they explore financing options through 2021. With 63% of non-bank lenders anticipating a weakening economy that will disadvantage competitors and provide more opportunities for them to lend, non-bank lenders are seizing the opportunity to land deals with strong middle-market companies; over one-third of non-bank lenders report that they have already lowered rates for high-quality borrowers.

Additionally, 35% of non-bank lenders surveyed indicated that there is increased demand for draws on existing loans or lines of credit, providing more opportunities to extend their relationships with existing borrowers. In a similar question asked by the Federal Reserve's Senior Loan Officer quarterly Opinion Survey, only 17% of bank lenders are seeing increased demand for draws.

Cerebro's Inaugural Survey Fields More Participation Than Federal Reserve's

The survey included non-bank lending partners nationally and was conducted by Cerebro as a complement to the Fed's survey on bank lending practices. While commercial bank lending has been tracked for the past 25 years, non-bank lending credit markets are not studied as consistently despite the market's growth. Non-bank lending institutions are forecasted to hold $1 trillion of loan commitments by the end of 2020, up from $300 billion in 2010, according to the Alternative Credit Council. Non-bank lending is now one-third of the size of bank lending to middle-market companies in the United States.   

Non-bank lenders from Cerebro's lender network were surveyed in October 2020 and lender participation exceeded the number of participants in the Fed's Senior Loan Officer Survey, in the same period by 10%.  Participating lenders represented over $335 billion in combined assets managed, with a primary lending focus of loan sizes from $2 million to $100 million.

"Non-bank lending institutions have grown rapidly since 2008, after commercial bank lending was severely constrained," says Kevin Gaughan, Director of Lender Relations at Cerebro Capital. "As the non-bank credit market has grown, loan terms have lowered interest rates and fees in an effort to win high quality corporate borrowers away from commercial banks and competitors."

Non-Bank Lending Fuels Middle Market

The broad array of debt financing options has helped address unmet borrower needs and brought significant borrowing opportunity to middle-market companies seeking loans between $2 million and $100 million. Cerebro has seen non-bank lenders offer their most aggressive structures with minimal covenants in loan requests from sponsor-backed companies, or from non-sponsored borrowers with EBITDA above $3 million. Companies experiencing either high growth or unexpected deterioration can benefit from relaxed covenants, interest-only periods, and collateral-lite structures that are common in non-bank loan structures.

More than half of the 800+ lenders on Cerebro's platform are non-bank institutions. With such a broad lender network, Cerebro offers middle-market companies a data-driven approach to navigating hundreds of non-bank lenders, which have significantly more variation in underwriting criteria than commercial banks. The diversity of non-bank lenders on Cerebro's lender network is expansive, and includes mezzanine funds, business development companies, and venture debt lenders.

"Top middle-market CFOs should be regularly evaluating the expanding universe of corporate lenders, especially in times of economic volatility," said Matthew Bjonerud, CEO of Cerebro Capital. "A recession or a sudden economic shock like COVID-19 can result in many companies switching lending partners. Wise management teams know that larger and more flexible loans can be a huge competitive advantage and those loans can be easier to source in the non-bank market."

With thousands of commercial banks and hundreds of non-bank lenders, it is virtually impossible to get a comprehensive overview of all available borrowing options without using technology. Cerebro's AI-driven platform was developed to predict loan terms, identify optimal lenders, and speed up the loan closing process for all tranches of debt across all types of bank and non-bank lenders.

About Cerebro Capital: Powered by over 800 bank and non-bank lenders, Cerebro Capital ("Cerebro") is a data-driven platform purposefully designed to democratize access to credit markets by connecting corporate borrowers and lenders to find and close corporate loans ranging from $2 million to $100 million. Working with finance and technology experts, Cerebro has created a holistic corporate loan management solution designed to revolutionize the way borrowers, lenders, intermediaries and stakeholders manage corporate debt. To learn more about Cerebro, please visit, https://www.cerebrocapital.com/.

Marley Vawter
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312-329-3912

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SOURCE Cerebro Capital