Will nonbanks surpass banks in commercial lending?
Nonbanks have been competing aggressively against banks for commercial and consumer loans in recent years. For the first time, the percentage of C&I loans held by nonbanks will be nearly equal to that held by banks, according to projections by Autonomous Research.
Nonbanks have become large, established businesses that are “here to stay” as competitors to banks.
According to Autonomous, banks’ share of the commercial debt market will drop from 24% to 23% in 2020, while nonbanks’ share will rise from 20% to 22%. Six years ago, banks held 26% of the market, and nonbanks had 16%.
Companies funding acquisitions and expansions are increasingly seeking out alternative lenders that, in many cases, offer speed, flexibility and looser underwriting requirements.
“Because there is so much capital in the market and companies are getting higher valuations, businesses are anxious to complete deals now, which is leading some of them to seek out nonbank lenders that can potentially move faster than traditional banks,” according to Matthew Bjonerud, CEO of Cerebro Capital.
“Probably five years ago in our report, we would have said these guys will blow up in the next recession. But now we’re five years in, and they didn’t blow up in the next recession.”