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Non-Bank Lending
Market Perspective
Q3 2020
Understanding the Alternative Lending Landscape
TABLE OF CONTENTS
1 Why Are Non-Banks Important?
2 Non-Bank Lending Survey Overview
3-5 Key Findings
6-43 Summary of Responses and
Bank Comparisons
Butler, Kelsey. “How Private Credit Soared to Fuel Private Equity Boom.” Bloomberg.com, Bloomberg, 2019,
www.bloomberg.com/news/articles/2019-09-22/how-private-credit-soared-to-fuel-private-equity-boom-quicktake
Federal Reserve Senior Loan Officer Survey, October 2020
https://www.federalreserve.gov/data/sloos/sloos-202010.htm
CITATIONS:
www.cerebrocapital.com
44 About Cerebro Capital
Non-bank lenders have existed for decades but were typically considered a last resortoption for companies on the brink of failure. However, in the decade following thefinancial crisis, middle-market CFOs, business owners, and financial sponsors havebeen turning to non-bank lenders as a viable lending solution.
What caused the demand shift?After the financial crisis abated, traditional banks faced increased regulatory scrutinythat resulted in tighter lending criteria. Credit committees declined more borrowers andreduced lending limits. Gone were the days when a long standing relationship couldtip the scales for companies who were just outside the bank lending criteria. Manymid-market companies that were still performing well were left asking where to turn.Over the past decade, the vacuum created in the market was filled by a proliferation ofnon-bank lending. With an ability to provide credit in structures and amounts thattraditional banks could not, these lenders experienced strong demand from well-performing firms willing to pay higher interest rates to ensure access to capital.
01
Global Private
Credit Market
2000 2018 2020
$0
$200
$400
$600
$800
$1,000
Billio
ns
Estimate for 2020
What helped alternative credit supply? This demand was met by a strong supply ofinvestment capital from institutional investors likepension funds and insurance companies. To helpthe economy recover faster, the Federal Reserveintroduced low interest rate policy, which reducedthe yield on traditional fixed income assets liketreasuries and resulted in billions of dollarsmigrating to higher yield investments like directlending. In just the past two decades, “[global] privatecredit, which includes distressed debt and venturefinancing, has ballooned from $42.4 billion in 2000to $776.9 billion in 2018. By one estimate, the totalis likely to top $1 trillion in 2020.”- Bloomberg (Butler), September 2019
WHY ARE NON-BANKS IMPORTANT?
NON-BANK
LENDING
MARKET
PERSPECTIVE
Q3 2020
COMMON TYPES OF
NON-BANK LENDERS
VENTURE DEBT FUNDS
ASSET-BASED LENDERS
MEZZANINE FUNDS
SBICS & BDCS
PRIVATE DEBT FUNDS
“Top middle-market CFOs should beregularly evaluating the expandinguniverse of corporate lenders,especially in times of economicvolatility." - Matthew Bjonerud, CEO, Cerebro Capital
02
Cerebro Capital connects mid-market borrowers to a breadth of lending options,including both bank and non-bank lenders. While commercial bank lending has beentracked over the past 25 years by the Federal Reserve, non-bank lending creditmarkets are not studied as consistently as commercial banks, leading to opacity in thealternative lending market. Cerebro launched a quarterly survey of non-bank lendingactivity for middle market commercial and industrial (C&I) loans that illustrates theperspectives of private credit lenders, also known as alternative lenders. About the Survey The survey included non-bank lending partners nationally and was conducted byCerebro as a complement to the Federal Reserve’s Senior Loan Officer OpinionSurvey on Bank Lending Practices, also released quarterly. Cerebro hopes to shedlight on this $1 trillion industry that is now approaching one-third the size of commercialbank lending. Furthermore, our findings provide insights on the impact that the currenteconomic environment is having on lending markets
Non-bank lenders from Cerebro Capital’slender network were surveyed in October2020. Cerebro's lender participationexceeded the number of participants in theFederal Reserve’s Senior Loan OfficerSurvey of the same period by 10%. Participating lenders represented over$335 billion in combined assets managed,with a primary lending focus of loan sizesfrom $2 million to $100 million.Participants included some of the oldestand largest non-bank lenders in the U.S.,including private and publicly traded firms.
Borrower demand for non-bank alternatives is surging.
03
NON-BANK LENDING KEY FINDINGS
Survey conducted by Cerebro Capital in October 2020. N = 68
Over the next 6 months, how do you expect demand for C&I loans from yourlending institution to change compared to its current level, apart from
normal seasonal variation?
Strengthen
substantially
Strengthen
somewhat
Remain basically
unchanged
Weaken somewhat Weaken
substantially
0
10
20
30
40
76% of non-bank lenders expect loan demand to strengthen over thecoming months as borrowers leave commercial banks in search ofrelaxed covenants and flexible loan structures.
04
NON-BANK LENDING KEY FINDINGS
Macroeconomic conditions are creating an even
bigger opportunity for alternative lenders.
Survey conducted by Cerebro Capital in October 2020. N = 68
Looking ahead over the next six months, how are changes in the macroeconomy likely toimpact your lending business? Please check all that you feel apply:
The macroeconomic environmenthas minimal effect on our
lending decisions.
We anticipate relaxing ourcredit standards as the
macroeconomy strengthens.
We anticipate tightening ourcredit standards as the
macroeconomy weakens.
We are anticipating a weakeningeconomy that will disadvantage
our competitors and this, inturn, will provide us with
expanding opportunities to extendcredit.
We anticipate a strengtheningeconomy that will likely lead to
an expanding supply of credit andless attractive opportunities forour institution to extend credit.
5
10
15
20
25
30
35
40
45
50
With 63% of non-bank lenders anticipating a weakening economythat will disadvantage competitors and provide more opportunitiesfor them to lend, non-bank lenders are seizing the opportunity toland deals with strong middle-market companies.
Some lenders anticipate tightening credit standards,
while others may look to ease standards.
05
NON-BANK LENDING KEY FINDINGS
Survey conducted by Cerebro Capital in October 2020. N = 69
How do you anticipate lending standards for C&I loans at your lendinginstitution to change over the next 6 months, compared to its current
standards, apart from normal seasonal variation?
Tightened considerably Tightened somewhat Remained basicallyunchanged
Eased somewhat Eased considerably
0
5
10
15
20
25
30
35
40
One-quarter of lenders anticipate tighter lending standards in thecoming months ahead, potentially due to weakened economicconditions, while other lenders are anticipating easing standards towin new business.
1. Looking back over the past three months, how have your lending
institution's credit standards changed for C&I loans?
06
Corresponding Federal Reserve Question"Over the past three months, how have your bank's credit standards for approving applications for C&Iloans or credit lines—other than those to be used to finance mergers and acquisitions—to large andmiddle-market firms and to small firms changed?"
Q3 2020 SURVEY RESPONSES
28
39
2
6
32
35
4
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40
# Responses
Commercial Banks (69) Non-Bank Lenders (77)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1a. Because your lending institution has tightened its credit standards for
C&I loans over the past three months, how important have the following
possible reasons been for the change?
07
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for tightening credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Deterioration in your lending institution's current or expected capital position:
31
10
1
22
8
4
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30 35
# Responses
Commercial Banks (42) Non-Bank Lenders (34)
Less favorable or more uncertain economic outlook:
4
13
29
2
15
17
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30
# Responses
Commercial Banks (46) Non-Bank Lenders (34)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1a. Because your lending institution has tightened its credit standards for
C&I loans over the past three months, how important have the following
possible reasons been for the change?
08
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for tightening credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Worsening of industry-specific problems:
2
12
31
18
16
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30 35
# Responses
Commercial Banks (45) Non-Bank Lenders (34)
Less aggressive competition from other lenders (other financial intermediaries
or the capital markets):
33
11
1
16
16
2
Not Important
Somewhat Important
Very Important
0 10 20 30 40
# Responses
Commercial Banks (45) Non-Bank Lenders (34)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1a. Because your lending institution has tightened its credit standards for
C&I loans over the past three months, how important have the following
possible reasons been for the change?
09
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for tightening credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Reduced tolerance for risk:
14
25
6
6
23
5
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30
# Responses
Commercial Banks (45) Non-Bank Lenders (34)
Decreased liquidity in the secondary market for these loans:
37
7
1
26
7
1
Not Important
Somewhat Important
Very Important
0 10 20 30 40
# Responses
Commercial Banks (45) Non-Bank Lenders (34)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1a. Because your lending institution has tightened its credit standards for
C&I loans over the past three months, how important have the following
possible reasons been for the change?
10
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for tightening credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Deterioration in your lending institution's current or expected liquidity position:
39
5
24
6
4
Not Important
Somewhat Important
Very Important
0 10 20 30 40
# Responses
Commercial Banks (44) Non-Bank Lenders (34)
Increased concerns about the effects of legislative changes, supervisory
actions, or changes in accounting standards:
32
10
3
13
18
3
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30 35
# Responses
Commercial Banks (45) Non-Bank Lenders (34)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1b. Because your lending institution has eased its credit standards for
C&I loans over the past three months, how important have the
following possible reasons been for the change?
11
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for easing credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Improvement in your lending institution's current or expected capital position:
14
2
1
2
1
Not Important
Somewhat Important
Very Important
0 5 10 15
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
More favorable or less uncertain economic outlook:
10
4
2
2
2
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1b. Because your lending institution has eased its credit standards for
C&I loans over the past three months, how important have the
following possible reasons been for the change?
12
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for easing credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Improvement in industry-specific problems:
9
4
1
3
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10
# Responses
Commercial Banks (14) Non-Bank Lenders (4)
More aggressive competition from other lenders (other financial intermediaries
or the capital markets):
4
7
5
1
3
Not Important
Somewhat Important
Very Important
0 2 4 6 8
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1b. Because your lending institution has eased its credit standards for
C&I loans over the past three months, how important have the
following possible reasons been for the change?
13
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for easing credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Increased tolerance for risk:
14
2
2
2
Not Important
Somewhat Important
Very Important
0 5 10 15
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
Increased liquidity in the secondary market for these loans:
12
4
2
2
Not Important
Somewhat Important
Very Important
0 5 10 15
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
1b. Because your lending institution has eased its credit standards for
C&I loans over the past three months, how important have the
following possible reasons been for the change?
14
Corresponding Federal Reserve Question"If your bank has tightened or eased its credit standards or its terms for C&I loans or credit lines overthe past three months (as described in questions 1 and 2), how important have been the followingpossible reasons for the change? Possible reasons for easing credit standards or loan terms."
Q3 2020 SURVEY RESPONSES
Improvement in your lending institution's current or expected liquidity position:
12
3
3
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12 14
# Responses
Commercial Banks (15) Non-Bank Lenders (4)
Reduced concerns about the effects of legislative changes, supervisory actions,
or changes in accounting standards:
15
1
2
1
1
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (16) Non-Bank Lenders (4)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2. Looking back over the past three months, how has demand for draws
on existing C&I term loan commitments and/or draws on (existing) lines
of credit changed?
15
Corresponding Federal Reserve Question"Apart from normal seasonal variation, how has demand for C&I loans changed over the past threemonths? (Please consider only funds actually disbursed as opposed to requests for new or increasedlines of credit.)."
Q3 2020 SURVEY RESPONSES
2
10
20
33
3
8
17
33
9
4
Substantially
stronger
Moderately
stronger
About the same
Moderately weaker
Substantially
weaker
0 5 10 15 20 25 30 35
# Responses
Commercial Banks (68) Non-Bank Lenders (71)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2a. If demand for C&I loans has strengthened over the past three
months, how important have the following possible reasons been for the
change?
16
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If stronger loandemand (answer 1 or 2 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer inventory financing needs increased:
11
3
1
7
16
2
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Customer accounts receivable financing needs increased:
11
3
1
9
10
6
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2a. If demand for C&I loans has strengthened over the past three
months, how important have the following possible reasons been for the
change?
17
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If stronger loandemand (answer 1 or 2 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer investment in plant or equipment increased:
11
4
18
5
2
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Customer internally generated funds decreased:
7
6
2
8
7
10
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2a. If demand for C&I loans has strengthened over the past three
months, how important have the following possible reasons been for the
change?
18
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If stronger loandemand (answer 1 or 2 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer merger or acquisition financing needs increased:
7
5
3
13
8
4
Not Important
Somewhat Important
Very Important
2 4 6 8 10 12 14
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Customer borrowing shifted to your lending institution from other lender
sources because these other sources became less attractive:
9
5
1
5
10
10
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2a. If demand for C&I loans has strengthened over the past three
months, how important have the following possible reasons been for the
change?
19
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If stronger loandemand (answer 1 or 2 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer precautionary demand for cash and liquidity increased:
5
9
1
5
7
13
Not Important
Somewhat Important
Very Important
0 5 10 15
# Responses
Commercial Banks (15) Non-Bank Lenders (25)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2b. If demand for C&I loans has weakened over the past three months,
how important have the following possible reasons been for the change?
20
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If weaker loandemand (answer 4 or 5 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer inventory financing needs decreased:
12
19
8
5
5
2
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (39) Non-Bank Lenders (12)
Customer accounts receivable financing needs decreased:
14
16
8
1
7
4
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (38) Non-Bank Lenders (12)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2b. If demand for C&I loans has weakened over the past three months,
how important have the following possible reasons been for the change?
21
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If weaker loandemand (answer 4 or 5 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer investment in plant or equipment decreased:
6
23
11
6
4
2
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25
# Responses
Commercial Banks (40) Non-Bank Lenders (12)
Customer internally generated funds increased:
21
17
1
6
2
4
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25
# Responses
Commercial Banks (39) Non-Bank Lenders (12)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2b. If demand for C&I loans has weakened over the past three months,
how important have the following possible reasons been for the change?
22
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If weaker loandemand (answer 4 or 5 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer merger or acquisition financing needs decreased:
17
14
7
8
4
Not Important
Somewhat Important
Very Important
0 5 10 15 20
# Responses
Commercial Banks (38) Non-Bank Lenders (12)
Customer borrowing shifted from your lending institution to other lender
sources because these other sources became more attractive:
31
6
1
3
4
5
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25 30 35
# Responses
Commercial Banks (38) Non-Bank Lenders (12)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
2b. If demand for C&I loans has weakened over the past three months,
how important have the following possible reasons been for the change?
23
Corresponding Federal Reserve Question"If demand for C&I loans has strengthened or weakened over the past three months (as described inquestion 4), how important have been the following possible reasons for the change? If weaker loandemand (answer 4 or 5 to question 4A or 4B), possible reasons."
Q3 2020 SURVEY RESPONSES
Customer precautionary demand for cash and liquidity decreased:
21
9
10
3
6
3
Not Important
Somewhat Important
Very Important
0 5 10 15 20 25
# Responses
Commercial Banks (40) Non-Bank Lenders (12)
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
24
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
2
7
55
4
2
15
47
6
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40 50 60
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Maximum size of loans:
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
25
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
10
55
3
1
6
60
2
1
Tightened
considerably
Tightened somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40 50 60 70
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Maximum maturity of loans:
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
26
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
18
43
7
1
24
32
12
1
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40 50
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Costs of loans:
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
27
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
20
37
11
2
21
39
6
2
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Spreads of loan rates over your lending institution's cost of funds (wider
spreads=tightened, narrower spreads=eased):
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
28
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
4
21
39
5
7
32
27
4
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40
# Responses
Commercial Banks (69) Non-Bank Lenders (70)
Premiums charged on riskier loans):
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
29
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
1
23
41
3
3
21
45
1
Tightened
considerably
Tightened somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40 50
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Loan covenants:
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
30
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
19
48
1
5
12
53
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased
considerably
0 10 20 30 40 50 60
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Collateralization requirements:
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
3. Looking back over the past three months, for applications for C&I
loans that your lending institution is currently willing to approve, how
have the terms of those loans changed?
31
Corresponding Federal Reserve Question"For applications for C&I loans or credit lines—other than those to be used to finance mergers andacquisitions—from large and middle-market firms and from small firms that your bank currently is willingto approve, how have the terms of those loans changed over the past three months?"
Q3 2020 SURVEY RESPONSES
8
25
32
3
4
8
54
4
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40 50 60
# Responses
Commercial Banks (68) Non-Bank Lenders (70)
Use of interest rate floors (more use=tightened, less use=eased):
Commercial Bank data is sourced from the Federal Reserve Senior Loan Officer Survey, October 2020
4. How do you anticipate lending standards for C&I loans at your
lending institution to change over the next 6 months, compared to its
current standards, apart from normal seasonal variation?
32
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
1
16
36
16
Tightened
considerably
Tightened
somewhat
Remained
basically
unchanged
Eased somewhat
Eased considerably
0 10 20 30 40
Non-Bank Lenders (69)
4a. If you expect your lending institution to tighten its credit standards
for C&I loans, how important are the following possible reasons for the
expected change in standards?
33
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
9
4
4
Not Important
Somewhat Important
Very Important
3 4 5 6 7 8 9 10
Non-Bank Lenders (17)
Expected deterioration in your lending institution's capital or liquidity
position):
Expected deterioration in collateral values:
3
8
6
Not Important
Somewhat Important
Very Important
2 3 4 5 6 7 8 9
Non-Bank Lenders (17)
4a. If you expect your lending institution to tighten its credit standards
for C&I loans, how important are the following possible reasons for the
expected change in standards?
34
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Expected reduction in competition from other lenders:
6
9
2
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10
Non-Bank Lenders (17)
Expected reduction in risk tolerance:
2
10
5
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
Non-Bank Lenders (17)
4a. If you expect your lending institution to tighten its credit standards
for C&I loans, how important are the following possible reasons for the
expected change in standards?
35
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Expected reduction in ease of selling loans in secondary market:
9
7
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10
Non-Bank Lenders (17)
Expected deterioration in credit quality of loan portfolio:
3
9
5
Not Important
Somewhat Important
Very Important
2 3 4 5 6 7 8 9 10
Non-Bank Lenders (17)
4a. If you expect your lending institution to tighten its credit standards
for C&I loans, how important are the following possible reasons for the
expected change in standards?
36
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Increased concerns about the effects of legislative changes, supervisory
actions, or changes in accounting standards:
5
6
6
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10
Non-Bank Lenders (17)
4b. If you expect your lending institution to ease its credit standards for
C&I loans, how important are the following possible reasons for the
expected change in standards?
37
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Expected improvement in your lending institution's capital or liquidity position:
7
7
2
Not Important
Somewhat Important
Very Important
1 2 3 4 5 6 7 8
Non-Bank Lenders (16)
Expected increase in collateral values:
6
6
4
Not Important
Somewhat Important
Very Important
0 2 4 6 8
Non-Bank Lenders (16)
4b. If you expect your lending institution to ease its credit standards for
C&I loans, how important are the following possible reasons for the
expected change in standards?
38
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Expected increase in competition from other lenders:
4
10
2
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
Non-Bank Lenders (16)
Expected increase in risk tolerance:
4
11
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
Non-Bank Lenders (16)
4b. If you expect your lending institution to ease its credit standards for
C&I loans, how important are the following possible reasons for the
expected change in standards?
39
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Expected increase in ease of selling loans in secondary market:
10
5
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10 12
Non-Bank Lenders (16)
Expected improvement in credit quality of loan portfolio:
5
8
3
Not Important
Somewhat Important
Very Important
2 3 4 5 6 7 8 9
Non-Bank Lenders (16)
4b. If you expect your lending institution to ease its credit standards for
C&I loans, how important are the following possible reasons for the
expected change in standards?
40
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
Reduced concerns about the effects of legislative changes, supervisory actions,
or changes in accounting standards:
6
9
1
Not Important
Somewhat Important
Very Important
0 2 4 6 8 10
Non-Bank Lenders (16)
5. Looking ahead over the next six months, how are changes in the
macroeconomy likely to impact your lending business? Please check all
that you feel apply:
41
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
16 17 21 43 8
The macroeconomic
environment has
minimal effect on
our lending
decisions.
We anticipate
relaxing our
credit standards
as the
macroeconomy
strengthens.
We anticipate
tightening our
credit standards
as the
macroeconomy
weakens.
We are anticipating
a weakening
economy that will
disadvantage our
competitors and
this, in turn, will
provide us with
expanding
opportunities to
extend credit.
We anticipate a
strengthening
economy that will
likely lead to an
expanding supply of
credit and less
attractive
opportunities for
our institution to
extend credit.
Non-Bank Lenders (68)
5
10
15
20
25
30
35
40
45
6. Over the next 6 months, how do you expect demand for C&I loans
from your lending institution to change compared to its current level,
apart from normal seasonal variation?
42
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
13
39
15
1
Strengthen
substantially
Strengthen
somewhat
Remain basically
unchanged
Weaken somewhat
Weaken
substantially
0 10 20 30 40
Non-Bank Lenders (68)
7. Over the next 6 months, what is your outlook for delinquencies and
charge-offs on your lending institution's C&I loans?
43
Corresponding Federal Reserve QuestionNo similar question asked in 3Q20.
Q3 2020 SURVEY RESPONSES
2
10
41
15
Improve
substantially
Improve somewhat
Remain around
current levels
Deteriorate
somewhat
Deteriorate
substantially
0 10 20 30 40 50
Non-Bank Lenders (68)
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