What is it like to be a community banker today? When was the last disruption with uncertainty this deep? The real estate crash of 2008? Y2K (what’s that?)? The stock market crash of 1989? The depression beginning in 1929? The flu epidemic of 1918? All of the above? Regardless, where do we go?
In the last month the federal government via the Small Business Administration scrambled to develop the Paycheck Protection Program, providing liquidity to small “main street” businesses so they could stay open until the shutdown had subsided or ended.
In 2019, the SBA assisted in $28 billion of bank-originated loans. In May, with six days of notice, the SBA requests tied to PPP increased by 25 times. Community banks jumped into action despite no clear plan and no electronic access system for applications, to ensure our businesses had a fighting chance. Unfortunately, federal guidelines are still confusing, inconsistent, nonexistent or not practicable.
And that is where local governments become critical. Compared to the last recession, business balance sheets show more liquidity and tangible capital, leverage is manageable and relatively moderate, and P&L statements reflect improved efficiency with improved GPM and less operating costs/expenses. This is good news for our region, but we have to be smart on how we navigate the uncharted waters ahead.
Government, in my lifetime, has been a regulator, rule maker or enforcer; it is time for that to change. Government, while recognizing that it frequently is, has to step up to be an intentional partner all the time moving forward. The over regulations the government has in place have not allowed us to be as nimble as we would like in this time, and businesses now more than ever will need nimbleness, not overhanded enforcement if our economies are going to bounce back.
We know that local governments get harped on about fixing the development process. This time we mean it. Over the years I have seen hundreds of deals killed because the cost to explore and open up a business is just too much. Preliminary studies, site plans, feasibility studies, traffic studies, they are endless and will be the death of new projects and the death of job retention and creation in our region. Government has to own up to its share of the cost of doing business and come to the table with reasonable solutions for business.
The first question we really need to ask, is how much do local governments really need to take upfront for business to launch a project? Or look at expanding a business? From a banking and finance perspective, when looking at business growth and retention, this is one of the critical questions that local governments will need to ask themselves in the next 18 months. Cash flow is king, has never been more true than right at this moment, and businesses need local governments to take this very seriously.
Through adversity comes innovation and opportunity. Yes, we are in this together for a long time. Best to rely on simplicity, common sense and historical experiences. Let’s come together for our communities by creating the best environment for business to thrive. I know community bankers are ready to help.
Harry Devereaux has been involved with banking in Northern Colorado for 45 years and is a Colorado native. He wrote this on behalf of NoCo Strong for Business, a group that brings local government officials together to discuss ideas for how they can support businesses, now and in the future.