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Tuesday, May 20, 2008

Daily Observations - Banks are Moving Cautiously

While talking to one of my favorite BDO's which stands for Business Development Officers she or he let me in one a secret today.

Shush! Banks are low on liquidity and reserves are now higher which mean that the bank has less of their own capital to lend, which ultimately means that the bank needs to borrow more from the FED. The difference in the borrowing rate of the FED and the cost to lend their money to borrowers is not enough of a spread for the banks to go to the FED to borrow.

Therefore many of the smaller community banks are being more and more restrictive of the loans they will book because they have to borrow the funds to raise capital to close the loans.

She/He did tell me that they felt as though this would be short lived and then banks will be freeing up their reserves within quarter or two.

In the meantime get the best and strongest deals you have to the local banks, they have to do something with their money and they are cherry picking, so why not let them cherry pick your deal. Borrowers need you now more than ever. The Financial Broker is critical in this day, You must become the CFO of every deal you work on.

You wear the Green Hat!

For more on the Role of the Financial Broker click here

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