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When the pandemic suddenly hits, financial marketers fall into turmoil, financial institutions face financial difficulties, while cautiously trying to meet demand when both the ability to provide business credit and the quality of business credit are reduced.

According to Tom Cronin, Manager of AFS, demand for bank loans among mid-sized and small business continuously increase, regardless of the question of how can they pay for new credit. Statistics from the Risk Management Association and AFS’s database show 710,000 commercial and industrial loans (C&I) and commercial real estate loans (CRE) in the first quarter of 2020.

  • Due to soar in the number of business borrowers, C&I loans had increased in the first quarter, causing a decrease in credit lines to hoard cash and prevent disruptions in cash flow. Compared to Q4 2019, the average increase of outstanding loans is 9.4%.
  • Short-term delinquencies (30-89 days past due) on C&I loans hit a record 0.86% in the quarter since the Great Recession.
  • The average debt amount is 0.96%, which is 1.5 times more than the 0.60% level of last year
  • Commercial real estate lending remained at a stable level. However, CRE delinquencies have increased and reached to levels that had not seen since 2015. Short-term loans (30-89 days overdue) stood at 0.6% in the quarter.

Many banks forecast that they will fall into capital shortage or worse, may have to sell assets by the end of the year. To maintain the current financial position, one of the support measures that many banks apply is to double the quarterly loan losses provision, which adds to its total provisions for loans and lease losses.

In response to the epidemic situation, bailout modalities are proposed for commercial borrowers such as deferred payment and payment extension. According to research by Greenwich Associates and S&P Global Market Intelligence, the majority of businesses choose to delay payment fully or partially. Live Oak Bank research shows that businesses are all facing difficulties and there is more possibility that big brands will go bankrupt; meanwhile, only 14% of small firms will have cash hoarders in the next year; nearly 50% of businesses generally reduce their reserves, and 55% will slip in value.

In addition, medium and large corporate banks have focused on improving their issuance standards for new loans to maintain the loan quality and adjust risks.

In the future, commercial lenders can use an effective method to determine whether or not to accept a loan by assessing credit risk based on types of scenarios, analyzing scenarios on a loan-by-loan basis, conducting an in-depth risk assessment and analysis frequently (Wintermeyer, 2020). In contrast to the basic approach to commercial lending that has been in place for more than four decades, this approach focuses on data in the future instead of focusing on past information. With this approach, a detailed approach is used instead of a portfolio level for analysis and conduct consistent instead of annual reviews. To react with the circumstance, banks must convert to forward-looking models for the purpose of accurately assessing low-risk portfolios and optimizing profits.

The pandemic has indirectly changed the needs and modes of commercial lending, realized by bank executives. There is no solid evidence to know whether changes to commercial lending are temporary during the pandemic or will become the long-term approach that will reshape the industry in the future. Therefore, in order to provide capital for worthy businesses in the coming time, many banks will carefully consider their existing portfolios and processes.



Cocheo, S. (n.d.). How the COVID Downturn is Changing the Business Lending Landscape. The Financial Brand. Retrieved from

Wintermeyer, L. (2020, June 19). Is Covid-19 Bringing Welcome Change To The Commercial Lending Sector? Forbes. Retrieved from


Vy Luong

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