Banking and Finance Quarterly: Sentiment: Optimism


Business owners have been through a lot of upheaval since 2020, but many financial experts agree that a large percentage are still looking to grow their enterprises in the coming year. There have been some changes in the lending landscape since the pandemic began, and some caution is necessary going forward, but executives at many Los Angeles banks are optimistic about the coming months.

Nur Menai, President and CEO, CTBC Bank America
Noor Menai, President and CEO of CTBC Bank USA.

According to the May survey of small business credit conducted by the 12 Federal Reserve Banks, 85% of employers have experienced financial challenges in the past 12 months, up four percentage points from 2020 and nearly 20 points from 2019.

Regardless of the downside, Bank of America’s 2022 Small Business-Owner Report indicates that 70% of business owners plan to raise money for their business in the next 12 months, despite inflation, commodity prices and supply chains.

In Los Angeles County, In the first half of 2022, Bank of America has lent $1.4 billion to small businesses — firms with less than $5 million in revenue — and $9.8 billion to commercial businesses — companies with between $5 million and $2 billion in revenue.

“We’re seeing very positive loan rates and approvals,” said Angela Antonio, Los Angeles small business region executive with Bank of America. A significant percentage of small businesses are currently looking to expand.

Anthony Kim, Hami Bank CEO and Chief Banking Officer
Anthony Kim, Hami Bank Executive Vice President and Chief Lending Officer.

72% of business owners say ownership has become more difficult over the past decade.

Relationships are more important

In the BofA report, nearly 80% of business owners said their business has been negatively impacted by the pandemic, with the majority noting negative impacts on sales, productivity and inventory.

“A lot of businesses have had to decide to stay open,” Richard Rafetto, president of the downtown-based City National Bank, told the Business Journal. “And many customers have learned where they stand with the bank.”
“Relationships are more important than ever,” he said. “Knowing your bank has become very important.”

Building strong relationships with banks helped companies keep staffing during the first months of the pandemic, when financial partners quickly helped customers through the Paycheck Protection Program (PPP), a loan program supported by the Small Business Administration. At the height of the epidemic.

While business owners who do not have a strong relationship with their bank are able to get cash eventually, companies with a strong bank relationship are less stressed in the loan process.

“We turned a problem into an opportunity,” said Anthony Kim, executive vice president and chief lending officer at Hanmi Bank in Koreatown. Kim noted that PPP loans have been timely for clients, encouraging them to bring more business to the bank and refer their colleagues. As a result, “suggestions have increased and so has the demand for credit.

As the pandemic months have passed, banks have strengthened their fintech options, making online banking easier and more accessible for community banking customers. But while financial relationships can now be built remotely, Joe Eurosek, regional president of Western Markets at Fifth Third Bank, notes that in-person meetings are still as important as they were before the pandemic.

“We’re meeting the customer where they need to be,” Eurosec said. “The physical meeting will not disappear, but the frequency may be replaced by remote opportunities.”

Update your business plan

For owners, there may be several aspects of their business plans that need special attention in this new era.
“You have to go down to the next level of detail,” said Noor Menai, president and CEO of CTBC Bank Corp. But even as interest rates rise, the credit is still there, he says.

“We will ask about a remote strategy. “And with supply chain disruptions, we will look at alternative supply chain options,” Eurosec said.
At places like Fifth Third, borrowers discuss contingency plans with their financial partners in detail and offer benefits with more focus on working capital needs and inventory investments, Kim Investments said.

Kim noted that financial planners at his bank are paying particular attention to customers’ credit ratings and secondary payment sources.

Sectors

More than 60% of owners surveyed recently told Bank of America that their business has fully or partially recovered from the pandemic, with more than half citing increased consumer spending as helping their business recover.

Loans for businesses can be based mostly on the sector. Industries Menay has seen doing well include e-commerce and multifamily and industrial real estate.
“We see many affected sectors recovering quickly,” Eurosec confirmed. Although business travel has slowed, consumer travel is growing.[We]are seeing slower utilization of hotels and flights on weekdays.

Several executives cited hospitality as a sector that has been slow to rebound. In the SBCS 2022 survey, nearly half of organizations in the leisure and hospitality industry reported a significant negative impact from the pandemic, compared to only 26 percent of manufacturing organizations.

The SBCS survey found that firms owned by people of color “are more likely to be in very poor or poor financial condition.” The survey found that 76 percent of black-owned businesses classified themselves this way, while 55 percent were white-owned.

To help some entrepreneurs, banks are developing programs in certain sectors to strengthen access. Bank of America, for example, is launching a pilot program in which female and minority borrowers can get down payments on commercial real estate.
More than half of business owners in the BofA report are working to protect themselves from future threats months after the pandemic.

Some 37% of respondents said they focused more on digital sales, 36% adopted new technology and 31% said they would increase their revenue streams.
For their part, lenders hope to continue to play a positive role for small business borrowers.

“Contrary to how bankers perceived it after the 2008 financial crisis, this time we have to wear white hats,” Rafetto said.
“Our government has stepped in, the end of the world has not come,” Menai said.

“Community banks remain the last mile for borrowers,” Eurosec said. “Not much has changed.” We have proven that we can make it in the interim even though we are going through a rough patch.



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