Grappling with the ups and downs of inflation, interest rates and potential spikes in the cost of borrowing and doing business has always been “all in a day’s work” for business owners and entrepreneurs. The time of this writing, the Federal Reserve took among its most aggressive actions in 20-plus years to curb inflation – a half-point interest rate hike, equivalent to two “typical” hikes. Such historic measures are also occurring as organizations continue to wade through the wide-rippling effects of the global pandemic, no less persistent supply chain and talent challenges.
“We have not seen this type of inflationary increase in almost 30 years,” said Tim Mittan, the district director with the Nebraska District Office of the U.S. Small Business Administration. “Most small businesses in existence today have never had to experience this.
“The first thing to do,” he continued, “is not panic. The hard part about this type of inflation is that it is not just an increase in costs, but it is compounded with supply chain issues as well.”
Mittan reinforced the importance of understanding all of the economic issues and available resources at present.
“Here at the SBA, we believe solid information and education are vital to help with growing concerns,” he said. “We rely on our financial partners and educational resource volunteers to help all of our small business owners.”
Interestingly, Mittan noted the office has not fielded many questions about inflation because “most businesses are still in COVID recovery.”
To its important aforementioned financial partners, Mittan said the SBA works with several lending organizations around the state.
“We work with traditional lenders and microlenders alike to help make funding available to small businesses when they need it,” he said, cautioning that, “we do not and cannot control interest rates. We work with lenders who help set the rates based off the current [Annual Percentage Rate]. As with any lending initiative, rates can change during processing. So, business owners need to take that into consideration when the loan is being finalized.”
Additionally, Mittan said his team is in the process of developing a workshop series to support businesses with challenges presented by inflation.
“These workshops cover topics such as alternative funding for when business owners get into a situation where they may need operating capital; marketing strategies, including traditional and creative social media tactics to help improve visibility; and small business economics to help business owners truly understand their bottom lines,” he said. “The important lesson is to not cut back on what will most effectively help you recover and get through the mire caused by the pandemic. Marketing should increase during an inflationary period, not be reduced.”
Mittan also encouraged readers to learn different tactics to stabilize their businesses by approaching those people who have already weathered such storms.
“When we are contacted by a concerned business owner, our first avenue of help is to introduce them to SCORE,” he said, a reference to its volunteer mentorship network. “They will then be assigned a mentor who will talk to them or work with them to develop a plan that will best suit their needs … they should never go through a hardship alone.”
In this vein, Mittan also referred to support from the likes of Nebraska Business Development Centers, women business centers, Center for Rural Affairs, and the Nebraska Enterprise Fund.
“We also encourage business owners to talk to their local bankers as well as the economic development specialists in their communities,” he said. “These resources are there to help them.
It may be tough going at times, but there are always waves in economics. Even though we are on an inflationary increase in that wave, the downward slope will be coming soon.”
Local Banking Community
When asked about how Centris Federal Credit Union has responded to choppy inflationary waters, President and CEO Steve Swanstrom said the organization has raised the dividend rate paid to members on deposits.
“This will help our members earn more income on their deposit accounts,” he said.
Inflation, as well as “regulatory burdens,” were cited as among foremost industry trends and challenges, with Swanstrom saying that these two factors “will make it more challenging for financial institutions to maintain low interest rates and costs for people who want to borrow money to purchase a home, a vehicle, a vacation, home repairs, home remodeling, or anything that requires a loan.”
Pivoting from industrywide to organizationwide developments, Swanstrom’s comments come on the heels of Centris celebrating its first year at its new headquarters at Sterling Ridge (132nd and Pacific streets).
“The facility has been received very positively by the community and by our employees who come to work every day,” he said.
Additionally, he said by end of June, Centris is launching a new technology to make getting a loan faster and more efficient.
“Every day we search for ways to introduce new technology or leverage existing systems that make it easier for our members to do business with Centris,” Swanstrom added.
Core Bank Senior Vice President Real Estate David Hartman also referred to how interest rates have been rising to curb higher prices and slow demand with inflation at historic levels.
“This, of course, has caused concern for homeowners and prospective homeowners whose home construction projects have experienced delays due to supply chain issues and labor shortages related to the construction industry,” he said. “To combat some of those concerns, we’re offering longer-term rate locks as well as rolling out some competitive portfolio products, which have been well received and something we plan to continue long term.”
Noting how every day they spend time talking to customers about financial needs, Chief Administrative Officer Heather Wilderman said they continue to enjoy personalized service and working with a financial institution that can offer a variety of products and services.
She, too, added that feedback has included the need for a faster, more convenient loan approval process.
“With that in mind, we invested in and rolled out RapidTRAC Loan — an online automated loan approval platform that allows businesses to apply for smaller term loans or lines of credit and receive instant decisioning on the loan,” Wilderman explained. “If approved and once any necessary documents are uploaded, Core Bank funds the loan in three business days.”
In turn, she said the business can complete the entire process at their convenience, where and when they want to.
“Local businesses are the backbone of our community and deepening our relationship by providing services that leads to their growth is our goal,” Wilderman added.
She also said Core Bank has implemented a new payment system within its online banking dashboard, which allows business customers to have integrated invoicing and digital payment software “at their fingertips.” They can send professional electronic invoices and collect payments electronically. There is also a secure payment link, she noted, that allows customers to e-pay conveniently.
Similarly, Wilderman anticipates that businesses will see a lot of tech advances offered by financial institutions over the next year, as fintech partnerships flourish.
“We’ve seen a lot of advances on the consumer side, now we are going to see a large push on the business side of banking,” she said. “There will be more auto-decisioning lending options … Financial institutions will offer additional embedded finance options directly in their online banking platform, as well as other embedded third-party services.”
Wilderman continued: “Financial institutions are attuned to the fact some of their customers are in cryptocurrency and want to assist their customers in that realm as well.”
Practices to Thrive By
SBA Nebraska District Office Economic Development Specialist and Public Information Officer Elizabeth Yearwood presents to small businesses about what they should do before and after disasters. Yearwood said that she covers 10 key “to-do’s,” starting with having a disaster plan and cash on hand for emergencies. A relationship should be established with one’s lender. She also suggested the need to “digitally transform your business” and to have a “heavy focus on marketing.”
“Consider pivoting to accommodate new circumstances,” she added.
Yearwood indicated that maintaining good credit, adequate insurance coverage, and good communication with staff vendors and customers is critical. Lastly, she emphasized using the free assistance that is available via SBA resource partners.
“Many of the businesses that were successful during and after the pandemic were the ones that either already had or were able to quickly put in place these things,” she said.
Yearwood also directed readers toward SCORE recommendations, which categorized sustaining businesses through challenging times or disasters into more than a dozen areas; notably, an assessment of one’s finances. Look, for instance, at negotiating payments with vendors, lenders, landlords and creditors. Explore cutting expenses and adding new revenue streams. Ensure there are backup sources when assessing inventory, supplies and equipment (amid ongoing supply chain interruptions).
Under the category of “market your business,” Google My Business and other local search listings were specifically mentioned as necessitating updates – with current information and hours of operation. Do much the same for your website, assuring that it remains up-to-date and fresh. Again, now is not the time for pull-back on emails, social media, chats and even messaging about the welfare and safety of visitors and employees.
Under “monitor your finances,” financial projections should span sales, break-even analysis, payroll expenses and cash flow statements to estimate future income, costs and profits. Consider these factors in different scenarios. From these projections, one can pinpoint financing will be needed at some point on the horizon. Cash flow forecasting can also be leveraged to prepare for the inevitable ups-and-downs and to monitor the cash that is king on a weekly, even daily, basis.