Looking Ahead to 2016

The beginning of a new year always brings with it a chance to reflect on the year gone by and to look ahead with optimism on what lies ahead.

In reviewing 2015, it turned out to be a year much as I thought it would be. The lending climate was still tough from a competitive standpoint, which it will continue to be until a major downturn hits again. The Fed discussed rates until they were blue in the face but never took any action. The GOP led House and Senate didn’t really accomplish much of what they had promised, and the 2016 Presidential race got underway with the most enthusiasm being for non-politicians. Will Washington get the message that the people are fed up with their partisan politics? Time will tell. If an outsider really does win the Presidency this year, maybe it will slowly dawn on them.

2016 will, no doubt, be an interesting year. Can the Fed go another 12 months without raising rates? Hard to believe they would be able to, but who can tell. Every time I think it will happen, it gets delayed again. At some point, they will have no choice, but when?

I would guess the small business lending climate will continue to be highly competitive again this year. The rise of the “cash advance players” have given us all pause to consider the future of small business lending. Will this relatively new product lead to major change in the industry or will it prove too costly and/or too risky to make a long-term impact?

These lenders have shown us one thing we had better strongly consider…the way new business is sourced will be changing in the years to come. When the Millennials are dominating small business ownership, will they look for financing in the same ways that prior generations have? I think not. Lenders will be found and vetted by borrowers through technology. Lenders to small businesses that are not preparing for this will wake up one day and find their costs to acquire a new deal are far more than their competition, and/or they are having a much harder time booking the same level of business they have enjoyed in previous years.

This may be a gradual erosion of deal flow, but erosion it will be. New business development officers need to rethink how they acquire leads, whether their institutions are leading them or they lead their institutions, the successful sales generators will be ahead of the curve on this front.

In recent days and weeks I have seen announcements from Regions Bank and JPMorgan Chase that they are forming alliances with some of these players to joint venture product offerings. Expect to see more of this as the banks realize how they bring their products to market is changing. Independent lenders must be aware of this as well and begin thinking through how this will impact their respective businesses.

What other changes are coming in the months and years ahead? Only the crystal ball readers know for sure. For the rest of us, we can only rely on change taking place, as it always has. The question we all have to ask ourselves…do we want to be a leader, a follower or become extinct in the process?

I prefer to be a leader, but how and where to lead is the question…and it is the one that keeps me up at night.

All the best for a successful 2016!

Mark Hafner
President & CEO
Celtic Capital Corporation