A Familiar Feeling

I’ve been doing this long enough that certain patterns are hard to ignore.

When money is easy, the early stages of a deal feel smooth. Conversations move quickly. Questions are shorter. There’s less resistance in credit discussions. That doesn’t mean standards disappear. They just don’t get tested in the same way.

I’ve noticed that tone again recently.

There’s capital available. Some of it is patient. Some of it is clearly under pressure to be deployed. You can usually tell the difference by how quickly structures are agreed to and how much room is built into assumptions.

I remember similar confidence in the years before the GFC. Different institutions, different borrowers, same mood. Funding was plentiful. Leverage was viewed as efficient rather than risky. On paper, most of it worked.

Until it didn’t.

The shift rarely arrives with an obvious trigger. It’s more gradual. Sales take longer to convert. Refinancing isn’t automatic. Funding partners begin to review exposures more closely. Projects that relied on steady momentum need more hands-on management.

That’s usually when you find out how a loan book was constructed.

If underwriting included realistic valuations, conservative leverage and contingency for delays, there is less to adjust. If growth relied on favourable conditions continuing indefinitely, decisions become more difficult.

None of this requires forecasting. Markets tighten eventually. Liquidity changes. Sentiment moves. The only variable is timing.

Over the years I’ve declined more deals than I’ve accepted. At the time, some of those decisions felt overly cautious. In hindsight, they rarely were. Saying no in a supportive market can look unambitious. It tends to look different later.

I don’t pretend to know what causes the next shift. Rates, liquidity, external shocks… it’s never the same catalyst twice. What I focus on is whether the underlying positions make sense if conditions are less generous.

Experience changes how you respond to risk.

The environment today isn’t unprecedented. It simply feels familiar.

Disclaimer: This article is prepared by Richard Woodhead. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.