By Joe McCoy, Market President, Commercial Banking, Hudson Valley and Fairfield CT, Valley Bank
Businesses in Westchester County, the Hudson Valley and Fairfield, CT, as in the rest of the country, are facing headwinds due to a challenging economic landscape as a result of rising interest rates, concerns about inflation, and uncertainty about the future. However, these markets remain vibrant, for now, and there is an economic vitality in the region driven by the life science, not for profit, and distribution sectors where opportunities for growth and expansion remain. Additionally, the flight to the suburbs from New York City continues to fuel the multi-family housing market.
However, business owners are rightfully uneasy as the economic outlook for the next nine to 12 months remains volatile and unpredictable. Inflation is high, which is keeping prices lofty. Rising interest rates are causing business owners to question if it makes sense now to borrow money, which can halt or postpone projects or large purchases. Rising costs, such as shipping/freight, payroll and insurance are having a significant impact on profitability and cash flow. Hiring at all levels remains difficult which is limiting the ability to meet customer needs and impacting expansion and growth goals.
With this economic environment, how should owners and senior executives be thinking about the present and planning for the future?
Be aware and understand what is happening within your industry, and the local and national economy. Keeping a finger on the pulse will help you plan ahead and be prepared for a variety of scenarios. Think about what is essential to manage your business and what you will need to put into place for growth in the near and long-term. Do you need additional working capital to support a slowdown in payments? Do you need new equipment to achieve greater efficiencies? Do you need to expand your space to accommodate growth? Do you need to hire more staff? Determine how much capital you need to manage this growth and whether you can manage the associated costs.
Be realistic about your business goals. Determine how you can adapt and grow during unpredictable times. Take a hard look at your expenses and determine what you can cut that won”™t negatively impact the business. Be careful about cutting too deeply into your marketing spend. Maintain strong cash reserves and availability on your working capital line so that you have flexibility if costs increase, vendors demand faster payments or customers cut back.
You are the expert in your business, but you may not be an expert in commercial banking. This is why it is so important to leverage your bank”™s expertise and build a strong relationship with your bank. They can help you understand the programs available to protect and grow your business. These can include:
- Working capital solutions: that help to maximize your use of cash
- Interest rate protection strategies: including interest rate swaps to help you plan for projects that are being developed
- Defensive cyber and fraud solutions: programs such as Positive Pay can help protect your business and provide dual control with multiple people in the organization reviewing and approving payments. It can”™t be stressed enough about the high level of check fraud that is prevalent today.
- Foreign exchange solutions: To protect you from volatile exchange rates when doing business internationally
- Strong guidance: your bank can help you understand the percentage of deposits insured by the FDIC and make sure that you have diversified your accounts
While there are no guarantees, if you stay focused on your business, have a solid financial strategy in place, and maintain a close relationship with your trusted advisors, you are positioning your business for success. There maybe a tough road ahead, but that doesn”™t mean your business can”™t succeed.
For informational/educational purposes only. The opinions expressed in this article may differ from other employees and departments of Valley Bank. Opinions and strategies described may not be appropriate for everyone, and are not intended as specific advice/recommendation for any individual. All loans products are subject to credit approval. Additional terms and conditions apply. You should carefully consider your needs and objectives before making any decisions, and consult the appropriate professional(s). Copyright © 2023 Valley National Bank. All Rights Reserved.
