Commercial Finance Market Watch: Strong Demand for Non-Bank Financing
With the ongoing uncertainty in nearly every sector of the economy, many eyes are focused on analyzing the impact of the Federal Reserve’s interest-rate actions, inflation, supply-chain issues and more.
Regional banks – and even some large national banks – are experiencing issues within their deposit bases and funding models, leading to increased regulatory actions and capital requirements. Many are preserving capital, selling assets to raise additional capital, and syndicating new financings for less strategic customers.
Meanwhile, leveraged loan market issuance declined 24% from 2021 to 2022, and was down again by 23% in Q1 2023 from the same quarter last year. This means there are fewer financing options for small and mid-sized enterprises. Yet, these companies are still investing in their businesses and deploying capital expenditures. Increasingly, they are turning to independent finance companies for financing in this environment.
Demand for financing
It’s a particularly excellent time for independent, non-bank commercial finance companies such as Mitsubishi HC Capital America. We are seeing an increase in activity as these companies are looking at alternative financing options. Many made investments over the last several years when government capital was plentiful and inexpensive, which has put them in a stronger financial position today. They have solid business models and strong industry positions, are landing new contracts, and are taking advantage of supplier consolidation. They’re looking to increase efficiencies and leverage technology.
Demand in the transportation and construction sectors is particularly robust. We continue to see tremendous growth in clean-energy assets and projects, and see strong demand for technology assets across all industries.
Independent lender benefits
Non-regulated lenders have a major advantage in that they can operate without the typical restrictions inherent in the banking industry. They can work with companies on an individual level, learning their business models, customer base and goals. As a result, they can often provide more access to credit and do a wider range of deals than traditional lenders.
As a non-bank financing provider with deep global resources, Mitsubishi HC Capital America is in a particularly good place. We’re also able to offer cross-border capabilities in the United States and Canada. For companies that do business in both countries, a one-stop solution makes the process easier, smoother and more efficient.
Digital capabilities are creating efficiencies both internally and externally, allowing us to handle credit decisioning faster and streamline funding practices. With a full suite of solutions – from working capital and asset-based lending to financing as-a-service models – we’re diving deeper into customers’ capital structures and addressing multiple financing needs.
What to expect for the remainder of 2023
We don’t see interest rates declining any time soon due to persistent inflation, even though higher interest rates will continue to play havoc with some bank balance sheets. So, unless an unexpected event changes the direction of the Federal Reserve, we expect overall conditions to remain fairly constant. With the economic uncertainty, credit tightening, and the ongoing demand from small and mid-sized businesses for financing, we believe Mitsubishi HC Capital America’s opportunities as an independent lender will continue to be significant.