We just got a read on the state of lending in this economy, courtesy of the Federal Reserve.
Its Senior Loan Officer Opinion Survey, which asks bankers about their lending standards and loan demand, came out this week. It found lenders are generally seeing less demand for mortgages, which shouldn’t be a huge surprise given how expensive those are right now.
But on the other hand, lenders are seeing more demand for business loans.
At Community Spirit Bank in Red Bay, Alabama, demand for business loans has held fairly steady over the last few years, said CEO Brad Bolton. That’s because many of his clients need to borrow to fund their day-to-day operations.
“If a logger or someone in construction — if their bulldozer’s worn out, they’ve just got to buy it,” said Bolton.
But recently Bolton said some customers have been asking about whether interest rates will fall this year because they’re trying to figure out when they should borrow more.
“Do I go ahead and make this purchase now, or do I wait six months where maybe rates will be cheaper?” said Bolton. He said that’s a sign businesses want to borrow.
Alice Frazier is the CEO of the Bank of Charles Town in West Virginia. She said companies have had several years to figure out how to survive amid high interest rates. As a result, “if they’ve got the opportunity to grow their business, I think they’re looking to go ahead and invest today and get new revenue sources going,” said Frazier.
She said it helps that the economy is more certain in many ways. For instance, inflation has cooled and labor is easier to find.
“If I’m a maid service company and I need another car and a couple more people, I’m going to make those investments because now I know what my cost of labor’s going to be because it’s settled down. I know what my cost of the car’s going to be because they’re more available,” said Frazier.
There’s still plenty of uncertainty going around too. Robert James II is CEO of Carver Financial Corp., which owns banks in Alabama and Georgia. He said businesses that receive money from the federal government, like health care clinics, are hesitant to take out loans. Because if federal funding freezes or dries up, “that’s going to impact their cash flow, which is going to impact their ability to service any debt that they take on,” said James.
But one thing he’s not worried about is his local economy.
“There’s continual high demand for real estate because we have so much in-migration to the Sun Belt,” said James. “We have strong job creation in our region.”
James said that means demand for loans where he does business is likely to keep growing.
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