Access to Capital Banker’s Insight
Small business lending from a banker’s perspective as of the end of January 2024 sheds light on the economic forecast and economic outlook from a banker’s perspective. Jerry Bazata provides insight to be considered following a virtual NACE meeting on January 24.
Economic Forecast: Impacts on the Event Industry
· Consumers are quickly eroding savings to pay for inflationary costs
· Interest rates have diminished the buying power of many for homes, cars, vacations, and special occasions
· The priority of marriage first and then a home has reversed in the past ten years
· Student loan debt repayment is back in focus
· Gen X is more concerned about debt than the baby boomer generation. Keeping up with the “Jones” is no longer a common catch phrase
· Transfer of wealth is an increasing concern as the life expectance of the family continues to expand
Economic Outlook: A Banker’s Perspective
· Interest rates will remain at the current level for the next 12-14 months and acceptance of rates at the current level will be the new normal
· Has credit tightened in the financial markets, not really, but the willingness for businesses to carry excess debt on the balance sheet has created that perception
· Banks are willing to lend, but the continued run off in deposits and the outflow of money has constrained banks in being able to lend capital
· Borrowers are not overly concerned with the current interest rate environment
Economic Outlook: A Banker's Perspective on Small Business
· Small business owners are not feeling optimistic about the current economic environment as they continue to feel the impact of inflation and hiring struggles, according to a new survey from the National Federation of Independent Business.
· The NFIB's Optimism Index was 90.7 points in October, significantly lower than the survey's 50-year average of 98
· 30% percent of owners responding indicated raising average selling prices for goods and services. Conversely 49% of small business owners reported lower average selling prices to meet critical thresholds of cash flow and remain open.
· While borrowing needs were not satisfied for 2% of owners, 23% reported all credit needs being met and 64% said they were not interested in a loan. A net 7% reported their latest loan was more difficult to obtain than previous attempts.
According to the 2023 Wedding Report released in the 4th quarter of this year. 2,016,383 weddings will take place in the US in 2023 at an average cost of $30,266. While the number of weddings is projected to dip slightly next year (to 1,998,165), spending is still expected to rise to $31,118, before the wedding count rebounds in 2025 to 2,006,904 weddings with an average spend of $31,695. As wedding costs rise, more than a third (36%) of respondents to the survey, which included various categories of wedding vendors, say they’re seeing a 10-24% cut in guest counts and an average decrease of 15-20% in wedding budgets. Also, almost half (46%) of respondents believe their business will be better off financially a year from now.
Post-Covid, the wedding industry experienced a rapid growth in revenues which exceed 26.58% in 2022, causing a surge of new venues and wedding vendors to enter the industry knowing that consumer savings and disposable income were readily available. In 2023 the wedding market quickly contracted and returned to a normal growth rate of less than 9% while entrance into our industry continued at a very brisk pace. Many entrepreneurs enter the market with the best intentions yet struggle to survive because of the lack of operational and financial experience. In 2024, the contraction of growth is predicted to continue and fall further to less than 5% growth in revenues and a tightening of consumer discretionary spending.
Demand for wedding services is vulnerable to economic conditions, and typically drops during periods of economic uncertainty and volatility.
By: Jerry A. Bazata