Quick: Short Message to Borrowers Amid Covid-19 Pandemic

New York City and many other cities in the U.S are on lock down because the numbers of casualties are growing exponentially. As of this writing, according to New York Department of Health, the U.S has confirmed 392,285 cases, 12,627 death, and 21,368 recovered. Our lives and businesses are about to change in a significant way. This is a new great depression that will reorganize the global economy in ways that are impossible to predict, currently. China’s locked down created a downfall in the financial markets, especially on the supply chain front. In order to keep the economy afloat, the Federal Reserve has injected $2 trillion into the economy and also slashed interest rate to zero. Currently, the 10-year treasury rate Is 0.726% and prime rate is at 3.25%.

We’re looking at increase in inflation rate and spending power for consumers. The financial markets have been caught with the throws of unrelenting downtrend over the past several weeks. New York Federal Reserve Board is conducting a massive liquidity injection into the markets in an attempt to ease panic and fears regarding companies access to capital. This virus will not destroy humanity. Although, all of our lives will be impacted by the time this ends. We are a resilient species and have proven many times in history that we always rise, even when facing the deadliest circumstances. What can you do as a borrower in the mean time?

A) Social Distancing: While you are practicing social distancing, taking care of a loved one, protecting others from harm, or simply working remotely. This is a great time to gather and prepare most of your documents (i.e. past two years of tax returns, schedule of real estate owned, start taking care of liens and judgements that are pending against you, etc.,) that are typically required from banking, lending institutions to obtain financing.

B) Credit Profile: Many alternative lenders will “seldom” work with borrowers that aren’t bankable – meaning most banks won’t help procure financing due to many factors that are related to stringent underwriting guidelines, federal regulations and weak credit profile. This usually happens because in the alternative banking, private lending space, financing strategies become very specific to each borrower’s own strength in liquidity, credit, asset, and experiences. That said, it is always imperative for borrowers to strengthen their credit profile. There are two articles among many at ReFivest.Com that you should take a look at 1) What Are Three Reasons Borrowers Get Turn Down By Lenders and How to Change the Outcome? and  2) Three Conversational Points That Have Banks and Lenders Fighting Over Borrowers. These short pieces will aid you in preparing your credit file, many other documents, and once Covid-19 take its complete downturn, you’ll have an arsenal of things to ready to go to get funded.  

C) Environmental Measures and Financial Statement:  Routine cleaning are sort of mandatory now with Covid-19 (i.e. washing hands frequently, wipe surfaces down, etc). For borrowers who are looking at acquisition financing, it could be problematic if the asset was constructed on land that a gas station stood or very close to some 100 years old chemical plant – something to think about. As far as financial statement, it is also wise to have a thorough asset and liabilities well prepared. This in turn will make lending underwriting process faster to help borrowers obtain financing quicker.

By: Ibsen Alexandre

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Ibsen Alexandre offers his opinions about real estate finance, business, and investments at www.Refivest.Com and other real estate publications  He can be reached for financial, technical writing and consulting at clientservices@refivest.com

The opinions expressed herein are those of the author(s) and do not reflect the view of a firm, its clients, any respective affiliates nor any Media Platform. This article is for educational general purposes only and is not intended to be and should not be taken as solicitation for investments or lending.