Like a teen who’s finished puberty, the lending markets still carry scars from the last five years of acne, braces, and school dance rejections. Fortunately, they are now more future focused on using their deepening pockets to finance the next great deal. Here’s what’s new:

1) No more tears and eyes on the prize

While Clark Street Capital CEO Jon Winick once worked with very sick, distressed institutions (including some that failed), he's now seeing a new pressure to lend as balance sheet lenders realize they can't avoid real estate forever. CMBS and securitized originators were quicker to jump back in, since they never had to bear the consequences (and flashbacks) of the bad loans that were originated. Banks began moving from defense and loss mitigation to increased lending in more regulatory-friendly areas, Jon says, like C&I lending and corporate lending.

2) Cash flow and valuation consternation

Cautious borrowers may be a bigger inhibitor to the market than lack of credit, Jon says. (Remind us not to go to Vegas with those guys.) But they have good reason: higher interest rates. "More conservative underwriting standards come into play when you're underwriting towards a rising interest rate environment," he tells us. Robust GDP growth north of 3% is definitely a positive sign, but rising rates mean issues with valuation and debt service coverage. While a deal might cash flow today at current rates, it may not tomorrow.

3) Thinking outside the box

A year ago, many Chicago banks thought commercial real estate was a four-letter word (especially in the under-$5M space), but today's borrowers have many choices ranging from recourse loans to securitized CMBS structures, Jon says. He's also seeing increased creativity in lending. Fresh off a 5th anniversary celebration at Hubbard Inn, Clark Street has recently focused on helping banks liquidate portfolios of overleveraged performing loans, and new buyers in the space include hedge funds, real estate funds, and REITs. As returns have continued to go down, it's made pricing that much better and sellers more comfortable pulling the trigger.