North Bay bankers explore what’s ahead in lending and finance for local businesses
A new year and a new set of challenges for North Bay businesses. Here’s what some local financial institution leaders had to say about what’s ahead.
With inflation expected to persist in 2023, to what degree do you see that continuing to impact lending?
Jeff Clark: It will continue to negatively impact lending for the foreseeable future. On March 31st Wall Street Journal Prime was 3.25%. It was expected to finish the year at 7.5%. Your cost of borrowing has more than doubled in nine months.
That does not include rising labor costs and other increased costs of doing business. The adult beverage industry has struggled to pass on increased cost of goods to consumers. It places producers in a tough spot.
Banks and borrowers are looking at increased refinance risk as well. Increased interest expense can render some loans unable to be refinanced at current loan balance levels when they mature. You must pay down the loan to a level that you can service the debt or you risk default. Many businesses do not have the liquidity for that. The ability to raise outside equity seems to have diminished of late.
Brian Kilkenny: Inflation is just one of the many factors affecting our local, regional, national, and global economy. Quality labor shortage, the lingering effects of the pandemic, geopolitical issues, and supply chain challenges are additional things that can affect local businesses.
The reality is that there are always a multitude of factors affecting the economy for both businesses and individuals.
While the last three-plus years have been especially difficult, our local businesses have, for the most part, done whatever they can to survive and even thrive in the face of adversity.
We’re all focused right now on where inflation is going, but wherever it goes, we need to account for it and recognize the world won’t stop turning.
Alison Martin: Businesses continue to face headwinds, including lingering effects from the pandemic like supply chain disruptions and rising costs.
We’re focused on helping our commercial clients navigate this environment with a broad range of solutions in addition to traditional lending. For example, we’re seeing increased demand for foreign exchange hedging strategies as volatile currencies impact companies that sell their products abroad and/or import materials. Companies are also accelerating their payment transformations, turning to us to help them digitize and automate more of their back-office work.
Sunil Pandya: Between supply chain stagnation, rapid inflation, rising interest rates, and one of the tightest labor markets to date, North Bay business leaders continue to operate in an environment that many haven’t seen in their professional lifetimes.
While escalating interest rates are no longer a surprise, with each Fed announcement, I’m having more conversations with North Bay business leaders to help them develop creative financing solutions to meet their short and long-term goals.
It’s a great time to conduct a thorough financial review, including cash flow projections, and have frank conversations (with financial institutions) to make any necessary adjustments to loan structures and working capital lines of credit.