Where Have All the Lenders Gone?

We have been facing a tough business environment these past four years. We have seen ridiculous inflation as a direct result of the enormous “spending packages” during the post Covid period. This inflation, in turn, led the Federal Reserve Board to increase interest rates by 5% over a two-year period.

This was the foundation of their efforts to rein in inflation, but, as usual, “they were late to the game” and now appear to have over-corrected in their actions. They have suggested that we are “almost there” on controlling inflation, but the pain seems to be spreading throughout the entire economy.

I’m not seeing prices of most inputs drop, even though they may be rising at a slightly slower pace. In this scenario, I have noticed that the process of acquiring new financing or even completing annual renewals for Clients has taken extremely long, in comparison to the past. I wonder why…

We have more information available to us on all businesses than we have ever had. There is nothing hidden, especially with the power of the internet and more recently the advent of Ai and all its opportunities.

With all the information we have at our disposal, what could be the hold-up on loans? Is it information overload on the part of Loan Officers? Is it extreme top-down management at banks, where no one has any authority to approve loans. Anytime there is a committee involved, it seems like the approval process grows exponentially. Could it be the “fear of making a mistake?” Consider the following:

I recently had a Client for whom I was seeking refinancing. Their approval took over a year. They have excellent equities, solid inventories, have been profitable in three of the last 4 years but were caught in the tumult of a bank buyout where their lender got absorbed by another lender. It was challenging, and, at times, I felt like I was leading the new loan officer through a finance course. I can assure you that it was taxing.

To avoid this, I suggest you always have the following information available, and this is something I helped this Client to develop:

• CPA Prepared Financial Statements
• Inventory Reports
• An updated Cash Flow Budget
• Responses to FAQs of bankers, regarding management decisions & plans.

What is the Next Step for you? Is it time to “Reset?” In my next blog, I will address that process.

Let’s take your business to the Next Level!