And what business owners can do about it.
Have you ever gone to a cocktail party with a bunch of commercial bankers? It’s not typically a rowdy affair. Bankers, by nature are a conservative bunch who like things to stay as they are. And while they are in the business of lending money, managing risk is in their DNA. And any change on a macro or micro level gets their antenna up.
Election years typically bring about uncertainty, and this can often give bankers pause. And then the administration takes over, and things usually settle down.
But this year is different. If you love Trump or hate him, I don’t think anyone will disagree that change is in the air. And while typically business people high five the calls for reduction in regulations and taxes, the other side of the coin that is not discussed is the general anxiety across many industries and borders.
I wasn’t surprised to read in the Financial Times this week that, “For the first time in more than five years, total outstanding bank loans have dipped for two consecutive months with declines in December and January. The Federal Reserve’s latest figures, published on Friday, show that the weakness has continued so far in February.”
It’s tougher to get a bank loan today than it was a year-ago. If you like it or not, bankers are going to look at business plans more carefully, challenge assumptions, and worry about risk. Business plans that involve relying on imports / exports will be thought about much more carefully, just to name one example.
And likewise, periods of uncertainty typically lead to rising interest rates. This makes bankers more nervous to lock in long term fixed rates.
The “Trump Euphoria” is balanced by “Trump Anxiety”. This is not intended to be a political statement, it is the reality on the street.
To respond to this, we recommend business owners take a few steps.
- Explore any opportunities to lock in long term fixed interest rates today. If you own real estate or are considering purchasing it, now is a good time to consider refinancing or taking the plunge.
- Seriously consider using the SBA for your loan requirements. Banks will be more inclined to lend money with the government guarantee intact.
- Give yourself extra time to get a loan and be prepared with good documentation, and a well thought out plan. The process will likely take longer than you think.