2018 Will Be a Banner Year for Small Business, Is Your CU Ready?

The National Federation of Independent Business (NFIB) collects trends on small businesses through surveys it completes monthly.  They have cone this with quarterly surveys since 1973 and monthly ones since 1986.  For 2017, the NFIB Index posted the highest yearly average that the Index has ever had in its history at 104.8. 

This Index surveys small businesses on items such as their view of labor markets, credit, sales and inventories, compensation and earnings, capital spending plans, and inflation.  Fifty-nine percent of owners reported attempting to hire new workers, 84% reported their credit needs were met or they were not seeking new credit, a net 28% of owners are experiencing higher sales, and 61% are planning new capital outlays. 

We have recently seen companies such as American Airlines, AT&T, Bank of America, Nationwide, Comcast, just to name a few, that have announced new bonuses for employees.  Other companies have announced major capital outlays.  Fred Smith, CEO of FedEx stated on Fox Business that “The key to take the risk out of expanding is the new tax policy.” 

The stock market is hitting new highs, again, today as I write this.  In 2017, the market was up over $7 trillion in value.  At the same time, over two million new jobs were created, capital spending is taking off, and housing is running quite strong. 

The NFIB cites the recent improvement in the economy as from the recent tax legislation combined with a cut in regulations from the Trump administration.  The new tax law is heavily weighted toward business compared to the Regan cuts.  The U.S. economy is on track to have 12 months of growth in excess of 3% by the end of the first quarter of 2018.  This is the first time we have experienced such growth in the past eight years. 

All these actions have helped create new hope and optimism for the economy, especially among the business community.  With this optimism for business, the plans for companies to make capital outlays and expand, the question to ask is, “Is my credit union ready?” 

At the start of the year, this is a wonderful time to review your structure of your MBL department and to make sure you are prepared for the heavy year of lending I believe we may see in 2018.  There are several items to put on your to do list.

First, are your policies and procedures revised to meet current regulations and your business environment?  Believe it or not, we still see MBL departments which have not upgraded their policies with the major regulation changes that hit at the beginning of last year.  Prudent lending dictates that all policies and procedures be reviewed annually. 

Next, have you set up a third-party loan review for your loan portfolio?  This is a strategy we use on our company to look at how we do business and what we can do to improve.  A third-party review can see how you apply your policy and procedures.  The ones which are valuable will help you see structural areas where you can improve and those sectors where you are already strong.

Third, what sort of training requirements have you set up for your commercial team and what sources are you using for ongoing training?  It is very dangerous to think that you are beyond any ongoing education as we all must learn continuously.  If you have not, set a minimum number of hours each year that every staff member needs to meet.   We started our group at 40 annually.  Last year every person on the Pactola team completed over twice this amount.

Fourth, what work have you done to establish a resource for funding large loans through participations and purchasing loan opportunities?  If you open your eyes to the possibilities, you will have the ability to fund larger businesses than what you believed could be completed.  There will also be great opportunities to purchase into good loan participations that offer diversity for your portfolio.

Finally, what is your strategic plan to grow this year?  Do you plan to expand your presence with medical professionals?  Maybe you want to fund more manufacturers?  Perhaps you know the top ten small businesses in your community and want to bank each of them.  January is a great time to dream with your team and set some real goals to achieve this year.

2018 is shaping up to be a banner year for business.  It is now time to make sure your framework is ready to take care of this increased business.  If you need help with your policies and procedures, file auditing, lender education, participations, and strategic planning, contact Pactola.  We exist to help you succeed with commercial and agricultural lending.