Small banks moving out of commercial real estate lending

The development of commercial real estate can be an important factor in the economic growth of Illinois. However, regulatory scrutiny of loans may create some challenges for those seeking financing for their projects. Small banks are particularly affected by changing regulatory efforts, which is causing many to sell their existing CRE loans as they back out of this sector.

Because small banks are trending away from this type of loan, larger institutions and private funding sources are having to provide the necessary funds for new development or the purchase of existing commercial properties. Foreign banking entities are also becoming more involved in CRE financing. Because many large banks have sold portions of their CRE loans to smaller banks in the past, the changes in focus of small banks have also carried into the decisions of leaders in larger banks. Although these changes are trending among a majority of smaller institutions, there are still some small banks that continue to fund loans for commercial properties.

Financing is just one of many issues affecting those involved in developing commercial properties. The type of business to be developed can impact the budget for getting a business off the ground. Some may need to work with building codes as they renovate existing structures. Others might work with these same codes as they plan the construction of new buildings. Zoning is another issue that can raise legal and financial challenges for a developer.

In attempting to launch a project, it can be helpful to work with a knowledgeable lawyer to ensure that there is good planning before facing various government entities for approval. Additionally, a lawyer could be helpful for ensuring that financing details meet the expectations of a developer and investors.

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