Significant Aspects Shaping the Future of SBIC & Commercial Finance Industry

In the SBIC & Commercial Finance market, companies lend money to small and mid-sized, privately-held emerging businesses, including commercial real estate brokers. Unfortunately, commercial banks and other lenders frequently underserve these businesses; even commercial real estate brokers aren't spared. Additionally, these lenders' primary target market includes financially distressed firms. As a result, the market participants offer specialized financing options, ranging from stock capital to senior debt securities. This funding is made available in collaboration with business owners, management teams, and financial sponsors, among others, for strategic buyouts, change of ownership transactions, recapitalizations, and growth initiatives. Mezzanine loans, which frequently have high-interest rates and can be converted into ownership in the target company, are among the various products industry participants provide, which is also quite common in Houston.

What are the Major Factors Shaping the Future of SBIC & Commercial Finance Industry

• Solid Asset Quality

In 2020, the majority of the industries in which SBIC & Commercial Finance companies offer loans were severely impacted by the coronavirus outbreak and the ensuing suspension of business operations; commercial property management businesses in Houston also took a massive hit. Industry players in the sector began to worry about a decline in asset quality. However, the administration's assistance through stimulus packages, widespread immunization campaigns, and the reopening of enterprises continue to boost economic growth. Although inflation continues to be a challenge, these are anticipated to prevent a significant increase in the rate of delinquency for industry participants.

• Regulatory Changes

In 2018, the Small Business Credit Availability Act amended the Investment Company Act of 1940 to relax the leverage restrictions for these businesses, allowing them to boost their debt-to-equity leverage from 1:1 to 2:1.

It allowed these businesses to invest in greater capital structures without sacrificing current returns, lowering portfolio risk. So, the act gave these businesses more funding flexibility and will continue providing additional growth prospects.

• Rising Rates

The Federal Reserve has aggressively increased interest rates so far this year, and these actions are anticipated to continue soon to rein in inflationary pressures. As a result, prepayments and refinancing have increased. However, higher rates will benefit SBIC & Commercial Finance market participants. In addition, the demand for these businesses' goods and services is also likely to increase, given the good economic growth. Therefore, it is anticipated that industry participants will see a significant increase in their revenues in the future.

Be a Part of Prosperous Future Prospects 

Acquiring and selling property is a task that must be left to professional Houston commercial real estate brokers such as Black Label Commercial Group, who have been actively supporting their clients with excellent commercial property management. If you are in Houston, you can rely on Black Label to give you unmatched support and services, including commercial development financing, to name a few.

Our Location: Commercial Property Management Houston: 1610 FM 1960, Houston, Texas 77073