Although recessionary fears are making headlines, BOK Financial® leaders say that their clients are more focused on making the most of a strong economy.
"At this point, I don't sense a great deal of anxiety among our clients in this market with regard to the economy," said Mark Nurdin, Fort Worth market CEO for Bank of Texas. "They're more concerned about growth and delivering the work that they have."
Here are the questions that he and other corporate and commercial bankers are hearing from clients—and how they're responding:
How can we acquire and retain talent, at all levels, given our strong backlog and growth trajectory?
"Knowing the market and what employees want is essential," said Bryson Bowden, corporate banking team lead at Bank of Texas. Competitive, current salary and benefit offers that include insurance, 401(k) plans, matching contributions and even financial planning education are very attractive, along with flexible, hybrid or remote working arrangements.
In-migration of companies locating in North Texas is driving worker demand and wage hikes, said Nurdin. Nearly 300,000 jobs were added to the Dallas-Fort Worth economy for the year ended May 30—three times pre-pandemic rates—according U.S. Bureau of Labor Statistics data cited by the Dallas Business Journal.
Due to substantial jobs growth in Colorado, where more than 110,000 jobs were added in Denver and Colorado Springs alone, Amy Bowman, commercial banker at BOK Financial in Colorado, said her clients are facing the same hiring challenges. "Attracting and retaining labor is my clients' largest strain. Not one client I've met with has not brought this up in conversation."
How can I even out the rough spots in a slowly improving supply chain?
Be in a position to buy inventory at the right intersection of price and availability, even if the need for inventory is not imminent, Nurdin said. "That requires sufficient liquidity to be able to go long on inventory without impairing the company's ability to meet its current obligations," he said, adding that highly leveraged companies can be at a competitive disadvantage.
According to Bowman, there are opportunities for vertical integration—being their own supplier whenever possible. "By drawing on a line of credit or their liquidity, for example, a company could bring work in-house or acquire a competitor to mitigate supply chain impacts."
What should I prioritize, given all my responsibilities?
Talent and human capital, said Bowman. "My clients are trying all kinds of new strategies. They're bringing in labor from other markets, assisting with immigration and visas, and paying stipends to employees who need childcare," she said. And they've renewed their focus on benefits, company culture and are surveying their employees for preferences.
In Texas, it's more about the balance sheet. Having a strong one will determine if you can capitalize on acquisition opportunities for inventory, equipment, a facility or a competitor. "Many clients' balance sheets are as strong as they've ever been," said Bowden. "My No. 1 client conversation these days is about expansion and acquisition. Those can't happen without a strong balance sheet."
Regarding acquisitions, how can I best prepare to be the "hunted" and not the "hunter?"
Having up-to-date, quality financial reporting and a succession plan in place will help maximize returns on planned or unexpected opportunities. And it shouldn't take the threat of a recession to be ready, Nurdin said. "Too many times," he said, "I've seen an owner miss out on anticipated or hoped for value because they couldn't respond promptly or thoroughly to an inquiry."
The acquisition market has also been active in Colorado—and at nice multiples—according to Bowman, with SBA loans playing a role.
What impacts are higher interest rates having?
"I've seen a slowdown in borrowing for investment real estate, though not so much for owner-occupied facilities," said Bowman. "If a company is growing, has the necessary labor and materials, and needs the space, then the interest rate becomes a secondary consideration."
How can you help me prepare for the uncertainty ahead?
"Our intimate knowledge of our clients' business and industry plus local market awareness allows us to be both an ideal sounding board for the challenges they're facing and a source of capital and connection when they need it," said Nurdin.
Bowman echoed that sentiment, "We are consultants and have the resources to provide sensitivity analysis and projections during this rate-increasing environment."The "if, when and how long" of a potential recession is uncertain at best. The three commercial banking experts say that business owners should filter out the noise and instead focus on what they can control, be it their hiring, purchasing, cash management or company culture. By doing so, businesses will be in a better position to "weather the storm" if a recession does come, they said.