Image by Alexandra _ Koch from Pixabay
When the COVID19 pandemic first hit the United States in March 2020 , it was anybody ’ s guess as to how the private lending market would be affected . At first glance , one would presume that loan demand would have been negatively affected due to the expectation that borrowers were going to “ hunker down ” and not ask for , nor spend money , as we , as a nation , even the world , had not experienced a shutdown of this magnitude since the pandemic during WWI .
In the early stages of this effectual shutdown of most of the economy , this was the case . Borrowers were reluctant to take on debt , as the future was uncertain as to how they expected to pay back loans . However , as time went on , even though most businesses saw a large decrease in revenue , the lockdown / shelter in place , had another effect ; many people were frustrated , feeling cramped where they lived , as a large part of the workforce had to work at home , and many households were not prepared to be at home 24 / 7 . This put an undue hardship , emotionally , on people , as they tried to balance work with home life ; especially if they had younger children who were not able to go to school .
Since many businesses were closed , people were able to save money , as they had no place to spend it , so to speak . This lent itself to the thinking that this was the new norm – working from home . This thinking made people start to ponder the future regarding the work / home life balance , and many chose to increase their living space . This , culminating with the fact of no commute for most workers , produced increased prices of homes in the suburbs where one could buy a larger house than in metropolitan cities .
The frenzy that ensued for house purchases was a boon for private lending , as , not only were banks a bit gun shy due to the pandemic , but
buyers were facing competition from other buyers and needed a competitive edge – quick closing offers . These two factors [ banks slowing down on lending and the ability to provide capital very quickly ], saw many private lenders having their best deal flow , by volume , in decades .
The question , for private lenders , is what happens after the economy eventually loosens up restrictions for most businesses , so they can get back to a somewhat normal cycle ? There are those who believe that working from home will be the new norm for many workers . The thought process is that companies that have been used to having workers work from home have proven that they can be productive over this past year . These same companies looking to cut costs will point to believing that they can shave off a lot of fat from their income statement by lowering a large part of their expenses – rent . Since workers do not need to come into the office , and , with the technology of Zoom , rent expense can be significantly reduced .
The question , for private lenders , is what happens after the economy eventually loosens up restrictions for most businesses , so they can get back to a somewhat normal cycle ?
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