On to Part XII of our Complaints Series!
Have you tried getting a mortgage lately? It’s harder to obtain now than it was 5 years ago. Goodbye no-downpayment days, hello put-your-cash-where-your-future-house-is days. You need to show you have good credit, you’re not up to your knees in debt, that you have a steady job, that you have insurance (sometimes), that your Facebook page is clean, that you brush your teeth every day… sometimes it seems that getting money is about as easy as finding a needle in a haystack. Today we’re talking about tightened lending standards as part of our ongoing Complaints Series.
It’s much the same with private lenders and merchant bankers, too. Private lending standards have also tightened, and many people are wondering why.
A lot of things can be tied back to the Financial Crisis of the late 2000’s, and this is one of them. The banks and lenders took too many risks and now some of them have learned their lesson, but in the meantime it means that everyone else has to suffer. It’s certainly caused many people to complain; if you paid your taxes, lived within your means, paid your credit cards on time, had some savings on the side – you’re doing the time without even having done the crime.
The banks also put at risk people who couldn’t afford for things to go wrong. Handing out 100% mortgages with no down payments came at a steep price – higher interest rates that eventually choked people so much that they couldn’t afford to be in their houses anymore.
When the crisis hit, everyone panicked. The result? Much tighter lending conditions. That’s as true for someone who wants to buy a house as for someone who wants to develop a resort or install a wind farm. Have you put some of your own funds into this? If not, banks and private lenders won’t even take a look at your project these days. What if you can’t afford to put more than… well, whatever you’ve got and it’s still not good enough? Unfortunately, that’s still where the road ends.
Investors and banks have become much more conservative in lending money and if you don’t take a risk, they won’t take a risk either. But if you’ve got something you believe in, and you believe in it enough to invest in it before you go looking for growth/development funding, then odds are that you’ll meet with receptive investors or bankers.
Always make sure that you make an informed decision in all matters,
All the best,