WASHINGTON, DC-Small commercial real estateborrowers are still struggling to secure loans fromlenders—and Dodd-Frank is one of the leadingreasons why, according to economists at the NationalAssociation of Realtors. Even though many of the rulesunder the legislation have not yet been written, it is clearlyhaving reshaping lending in this sector, NAR economistGeorge Ratiu tells GlobeSt.com. "We are definitelyseeing evidence of that, especially among lower-tier borrowers," hesays.

Ratiu says the association first saw signs of this earlier this year when itconducted the 2012 Commercial Lending survey. Borrowers that reliedon local banks, credit unions, regional banks and privateinvestors—the main sources of small business finance--all reportedtighter underwriting and scarcer loans by banks that have toreserve more assets. The problem is widespread, Ratiu adds. "Some67% of commercial realtors have had sales transaction fail due tolack of financing over the last year or so." Besides the stricterlending requirements, Dodd-Frank is also culling banks from theherd, Ratiu says. "Dodd-Frank is leading to the closing or failureof many small banks.

The problems of small CRE borrowers were also highlighted in aseparate reportreleased last week by the US Small Business AdministrationOffice of Advocacy. It found that the dollar value ofsmall business loans outstanding totaled $587.8 billion in thesecond quarter, a drop of 0.4% from $590.2 billion in the previousquarter. The good news, relatively speaking, is that total smallcommercial real estate loans declined at one of the slowest ratessince the start of the downturn, while small business commercialand industrial lending remained steady during the first half of2012. It is the larger-sized institutions that seem to be lessinclined to lend to CRE projects. According to the report, smallbusiness lending by large depository institutions with assets of$50 billion or more edged downward after remaining relatively flatwith negligible increases in the previous four quarters—and thedecline was generated primarily from CRE loans.