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An Early Look at the Impact of 2023 Economic Factors on Borrowers

Posted on April 7, 2024 Published by

In the dynamic world of finance, borrowers are constantly buffeted by a multitude of challenges. The past five years proving to be particularly tumultuous. Not only have financial institutions been grappling with these obstacles, but entrepreneurs seeking financial support have also found themselves navigating choppy waters. From the unprecedented disruptions caused by the COVID-19 pandemic to supply chain disruptions, employee shortages, and inflationary pressures, businesses have faced an array of formidable challenges.

An Early Look at the Impact of 2023 Economic Factors on Borrowers

As we begin to see the year-end financial data for 2023, a clearer picture of how borrowers have weathered this storm is starting to emerge. In the coming month, our blog will delve into the latest figures and trends. This will offer insights into the performance of borrowers in this rapidly evolving landscape.

One undeniable factor shaping the borrowing landscape is the significant shift in the interest rate environment over the past 18 months. While higher interest rates are anticipated to impact the performance of businesses in 2023, it is noteworthy that many enterprises have built up substantial reserves of liquidity to cushion the blow. However, the extent of their liquidity position as they emerge from 2023 remains a key point of interest. Particularly, with potential implications for increased reliance on borrowing facilities, particularly lines of credit.

Higher Interest Rates

In addition, the impact of higher interest rates is keenly felt in certain sectors. New construction for investment real estate bearing the brunt of these changes. Deals that seemed viable just 18 months ago may now be facing significant challenges. They underscore the importance of adaptability and foresight in navigating volatile market conditions.

Repricing loans is also emerging as a pressing concern, with some borrowers experiencing a doubling of interest rates. This abrupt shift, coupled with considerations such as existing amortization levels, is poised to have far-reaching implications for real estate performance in the foreseeable future.

What Is Coming Up

As we prepare to delve deeper into these issues, it is evident that a nuanced understanding of the prevailing economic landscape is essential for borrowers and financial institutions alike. Through our upcoming blog series, we aim to provide a comprehensive analysis of the challenges and opportunities facing different industries. We will be shedding light on the strategies employed by resilient businesses to navigate these uncertain times.

The road ahead may be fraught with challenges. But it is also paved with opportunities for those equipped with insight and resilience. Join us next month as we examine borrower performance across various sectors. This offers actionable insights to empower businesses in their quest for financial stability and growth. Stay tuned for an in-depth exploration of the evolving economic landscape and its implications for borrowers and financial institutions alike. An Early Look at the Impact of 2023 Economic Factors on Borrowers continues to be a focus.

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— Meghann Kasper, Chief Credit Officer, Bank First
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— Bill Beardsley, President, Michigan Business Connection
“By questioning some of our methodologies, Enlighten has helped us say, ‘Okay, this is where we need to train staff better and focus on so that they understand what they're doing better.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“The organization of the communication — before, during, and after the reporting process — was certainly better with Enlighten than what I've experienced with a lot of auditors.”
— Bill Beardsley, President, Michigan Business Connection
“The staff at Enlighten have been available for questions, in addition to the engaged work that they do. They've been very helpful as a resource beyond the major audit.”
— Meghann Kasper, Chief Credit Officer, Bank First
“Enlighten gives us a very good second set of eyes on our transactions. They're not afraid to challenge us on some of the work that we've done, which is what is needed. I don't need to pay somebody to tell me I'm good, I need to pay somebody to tell me where I've made mistakes.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“Enlighten provided industry best practices that weren’t going to show up in an audit report. They would say, ‘Hey, I noticed you do this. This is really unique, you do a really great job of it.’ And then they might add, ‘Some other clients that I have are doing something like this.’”
— Bill Beardsley, President, Michigan Business Connection
“By questioning some of our methodologies, Enlighten has helped us say, ‘Okay, this is where we need to train staff better and focus on so that they understand what they're doing better.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“The organization of the communication — before, during, and after the reporting process — was certainly better with Enlighten than what I've experienced with a lot of auditors."
— Bill Beardsley, President, Michigan Business Connection