It’s been more than 3 months since the first outbreaks were reported in the U.S., prompting massive shutdowns to communities and states across the nation. With the shutdowns came reduced capacity for most industries as workers who were able turned to telecommuting from home. Those who could not telecommute, particularly in service, manufacturing, and hospitality, suffered layoffs, furloughs, or reduced hours for businesses deemed essential yet had massive sanitization and occupancy restrictions placed on them.
For some, it felt as though the economy ground to a halt, while a smaller percentage of businesses have been racing to keep up with demands, such as cleaning products, personal protection equipment (PPE), and transportation, which required many to shift load types to deliver much-needed supplies to essential businesses.
Reopening Amid Pandemic
Governors across the nation have heard the call from the White House and their own populations, a desire to return to normal, reopen economies, and get back to work. With varying degrees of success, states began lifting restrictions in May, and even more into June. As businesses begin churning again, the question is raised, “will we receive the financing we need to move into the next phase of business?”
Finance and Business, Post-Pandemic
While we are, and will continue to battle infections with COVID-19, businesses have re-emerged, eager to rebuild from what was left in March, and turn around the abysmal quarter we’ve experienced as a global economy. Recovery and growth take capital; are banks and financiers responding in kind? On the macro scale, yes. However, banks are bracing for a frenzy as more businesses reopen, some with regulated changes requiring investment in new equipment.
Originating new loans for commercial real estate may take longer than previously, as a predicted 8% increase in defaults is projected. Retail banks have been slow to re-open lobbies and are instead relying on drive-up service in most areas servicing consumers and small business customers, with hub branches opening lobbies at reduced capacity. In the commercial equipment financing, the Monthly Confidence Index – Equipment Finance Industry (MCI-EFI) is recovering after a precipitous fall from April’s low of 22.3%, rising to 25.8% in May, but bank economists now predict a stronger wave of recovery in the third quarter.
Working Capital’s Influence In Recovery
Much of the MCI-EFI’s slow recovery is due in part to businesses slowly returning to normal production levels are playing it safe, holding onto capital rather than investing in new equipment, talent, and inventory. With the Fed maintaining near-zero rate for banks, borrowing for equipment is cheap, and working capital solutions are available to help companies keep positive cash flow while they do their part to re-energize the economy.