Now is the Right Time for Business Lending, Financial Banking
Now might be the right time for businesses looking for financial backing to reach out to banks to help with plans for expansion and growth.
“When small businesses are given the tools to grow, that means growth for the economy,” says Craig P. Doyle, Arizona regional president of Comerica Bank. “We have the ability to provide capital to those businesses that can grow.”
The status of business lending in Arizona has been in question during a tough economy, but the reaction from Arizona banking representatives has been similar across the board: banks are lending, and the number of loans issued has increased over the past year.
Most banks in Arizona have weathered the economic crisis fairly well, and have had the ability to continue to make loans.
Dean Rennell, a regional president at Wells Fargo Bank says he has seen a steady improvement in business lending over the past year.
During that period Wells Fargo extended approximately $14.9 billion in loans to small businesses nationwide, a 13 percent increase over the year before.
In Arizona alone, Rennell says he has seen Wells Fargo’s lending increase 15 percent over the past year.
“Borrowers are showing improved financial performance,” Rennell says. “That means they’ve adjusted to what people are calling the ‘new normal,’ and they’ve diversified and become more efficient.”
Rennell is seeing a significant amount of loans from small businesses looking to buy competitors or real estate, or expand the company.
Companies that had cut back on expenses are now starting to invest in new equipment and technology that they had refrained from purchasing in the past.
“We’re seeing expansion requests and some businesses are taking advantage of the opportunities they see in the marketplace,” Rennell says.
Arizona banks have been able to lend during the recession because Arizona has a large number of companies that are well managed and credit-worthy, experts say.
“Most banks in Arizona are capitalized and have enough liquidity and capacity to make loans,” says Curt Hansen, executive vice president of the National Bank of Arizona. “There are a lot of well-run large and small banks, and Arizona is a good market long-term.”
When looking at possible loans, banks still desire the same qualifications they have in the past, such as a good track record, a strong management team and an ability to weather tough times.
The biggest difference now is that banks are paying more attention to the actual documents required for the loan.
“Bankers are looking at borrower’s ability to withstand short-term shocks and the borrower’s ability to repay the loans requesting,” Hansen says.
Lynne Herndon, city president at BBVA Compass, has seen an increasing number of loan requests coming from the small business segment.
“Almost 70 percent of business owners in Arizona belong to the smaller business segment, and that’s the segment where we’re seeing growth,” Herndon says. “Those entrepreneurs and business owners were cautious before and are beginning to venture out more.”
Most businesses large or small have some form of lending, whether it is a line of credit, equipment loan or real estate loan. Lines of credit are necessary for companies to continue to operate, and many companies are renewing the lines of credit they already have.
BBVA Compass Phoenix saw double-digit loan growth in 2010 of about 12 percent, and has seen about a 15 percent increase in 2011.
The only area where Herndon says he doesn’t see as many loans being issued is in real estate lending.
According to Herndon, the uncertainty in the Arizona housing market plays a huge role in the decline of real estate lending. People are still wondering if values have hit bottom.
“The economy is still a concern, and the political climate,” Herndon says. “Most of the companies and businesses here need a banking relationship in order to maintain and grow their company. The demand for loans is definitely increasing and I’m hopeful this trend will continue to improve.”