Tis the Season to do Nothing? The Cycle of Commercial Finance

Every industry has its own unique seasonality to it. Out here in the Black Hills of South Dakota, tourism drives a lot of the economy. Therefore, we see hotels and restaurants swell with business between Memorial Day and Labor Day, and then they sustain with lighter local traffic in the colder months. We here at Midwest Business Solutions are not a tourism company, so we follow a different pattern.

Our CUSO operates like the back office of a regional bank (or a very large credit, I can only presume). Our busy season starts in February. Why February? It would seem there is a lot of planning and goal setting that occurs in January, and people hit the ground running in February. We start getting calls on almost a daily basis to look at various projects that people want to start this year. This is also the time of year a lot of existing business loans have their annual loan reviews that need to be done.

The calls and reviews start coming in February, which means underwriting of these projects start in March and April. All the while, more loan reviews are coming in. Life feels hectic and hard to keep up with until June. And all of a sudden, it is like you reach a plateau. The calls stop coming in, and the reviews stop coming in. Now we are making the calls, and nobody answers. Why not? It appears everyone has picked up and gone on vacation!

The entire summer feels like a bit of malaise in terms of getting projects complete. Projects move forward, albeit, slowly. It takes a lot of time for calls or e-mails to get returned, because there is always a key decision maker somewhere who is out. And say we do wrap up a project and have a call for that participation opportunity, the attendance on that call tends to be especially low since fewer people are around.

And then Labor Day hits and fall begins. Now we suddenly hit another busy season. Everyone gets back from vacation all at once, and they are pushing hard to get projects wrapped up before the end of the year. Again, it can be a bit overwhelming. And then October 15th rolls around, which is the drop-dead date for tax return extensions, and so we have another wave of loan renewals. All of this momentum starts to die out by Thanksgiving.

After Thanksgiving, the phones stop ringing, and business becomes relatively quiet until after the holiday season; or roughly speaking, until February. While this might be a good time to relax, the truth is, we identify projects throughout the year we need to tackle, and we are hoping we have enough time between Thanksgiving and February to get them complete. And, we may have been referred loan opportunities during the summer or fall that we may not be able to kick-off until after the New Year. In other words, we will still have underwriting work even when we are slow.

It is interesting that the busy seasons in finance are spring and fall, and the slow seasons are summer and winter. But just because there is a slowdown in communication doesn’t mean we experience a slowdown in work.