Business Banking Trends: Challenges catalyze opportunities for 2023.

• Author: Barbour, Tracy

Businesses today are coping with the cumulative effects of a slew of issues, including supply chain disruptions, labor shortages, inflation, rising interest rates, the Russia-Ukraine war, and the lingering effects of the COVID-19 pandemic.

"The pandemic has drastically changed many businesses," says Wells Fargo Alaska Commercial Banking Leader Sam Mazzeo, "The labor market tightness, excessive inflation, real estate market changes, and material supply chain issues linked to COVID are ongoing and evolving. Nobody has navigated anything like what we experienced the past three years. Banks and borrowers are forced to reconcile the risks and opportunities related to all of these things."

The US Federal Reserve (the Fed) raised interest rates dramatically in the past twelve months, up to their highest points in more than ten years. Mazzeo says most economists are projecting further interest rate increases, as the Fed continues to battle inflation.

Wells Fargo is working closely with its clients to ensure they maintain adeguate cash flow and strong liquidity positions. "Working with your commercial banking relationship manager early and often can help you avoid unwanted surprises and offer you flexibility," Mazzeo says. "It's a great time to conduct a thorough financial rev ew, including cash flow projections, and have frank conversations to make any necessary adjustments to loan structures and working capital lines of credit."

While the rising interest rate environment is disconcerting, one of the primary issues for commercial banking and all industries now is labor, says Jason Criqui, commercial lending manager at Northrim Bank. Finding qualified employees, developing people internally, and finding programs to bring young people in to replace retiring Baby Boomers will be the biggest challenge. "We're all going to have to be creative in the way we move forward, including leveraging technology to do more with less," he says.

Focus on Relationships

All these challenges place more pressure on managers, particularly at small companies, says Northrim President and Chief Lending Officer Mike Huston. From the banking side, it created a challenge--and opportunity--for Northrim to support companies' management with its advice and expertise.

However, relationship banking means different things to different people, Huston says. Tor us, it means having a banker that understands the market that the business engages in and being responsive to that business,"...