Are SA banks running scared?

A scary trend we have noticed the last few months is the onerous finance conditions SA banks are applying to commercial & industrial property investments, particularly for small to medium size investors. With the economic downturn and potential tenant failures, some might consider this prudent lending, however, the conditions are so tight that it is causing transaction loss and significant retraction in wealth creation by the affected parties. Whilst these may be times to be conservative, it is also a great opportunity to be innovative. Many banks do participate in equity transactions in larger investments with set exit strategies, however, they have a magnificent database to match small to medium size investors into partnerships against mutual approval of course. The banks are in an ideal position to facilitate these introductions as they have financial track records and would be well aware of best fits. This methodology will mitigate the risk with greater equity stakes possible from two investors and thus keep the deal flow churning. Rather than lose two transactions from two investors, create a mechanism for them to joint venture and get the deals done.


All is not the fault of the banks though. Many of these investors are wary of the unknown and shy away from partnerships with unknown entities, preferring to go it alone. The onus is on the investor to provide the bank with comfort and given that the banks are adopting a more conservative stance, the investor has to adapt. So either greater deposits or greater security is called for. Both these aspects can be catered for in joint ventures with like-minded investors during these turbulent times…the funds do it…large investors do it…the banks do it…why not?