View from a banker: Charlotte-area companies are juggling challenges but remain bullish
The following article appeared in the April 8, 2022, edition of The Charlotte Ledger, an e-newsletter with business-y local news and analysis.
Q&A: Wells Fargo commercial banking leader on interest rates, economic challenges, Charlotte-area outlook
For many local businesses, it’s a tricky economic time: Finding qualified workers is tough. Shortages are rippling through many industries. Prices are rising dramatically. And interest rates are climbing.
For a look into how Charlotte-area businesses are coping, The Ledger turned to Hunter Shull, Wells Fargo’s commercial banking leader for the Charlotte region. He leads a team that talks regularly with companies in the $10M-$2B range of annual revenue about the health of their businesses and their needs for money.
He spoke last week with Ledger editor Tony Mecia. Remarks were edited for brevity and clarity.
Q. Interest rates are going up. What are you seeing in commercial lending in Charlotte and the Charlotte region?
As our team speaks with business owners or executives, there are a few things that tend to come up in most of those conversations. And the first continues to be labor. Finding and keeping the best talent is a challenge.
Second is the dynamic with the supply chain, and that affects businesses in different industries differently. There are timing issues and price issues, where things can be more expensive because of the supply chain dynamic. That manifests in the way a company manages inventories effectively — either having to build inventory or plan for inventory to meet client or customer needs. All of that can have an impact on a company’s need for capital.
What a lot of business owners and executives are trying to better understand is how all of this ends up with interest rates — and where will rates go, and what might that mean to a company? And how should they be managing their budgeting and forecasting?
Q. Are companies in the Charlotte area still looking to you in the same way that they were before for capital investment? Or is that starting to slow down? What's the overall trend line that you're seeing?
Going into the pandemic, and through the pandemic, many companies were effective in managing their balance sheets. Companies were impacted differently, but many companies were able to manage liquidity effectively so that they were in a position of strength where they had borrowing capacity, or they had liquidity to manage through some of this.
We’ve seen that companies have been successful in being well-positioned. But we do expect and we have seen of late that there is an increase in the need for debt, to manage through some of this, and so we are seeing more conversations around that.
Q. How much concern is there that rates are going up — that the rates they might have gotten on a loan a year ago are going to be higher today?
It has put a premium on budgeting, forecasting and planning for business owners and executives. Rising interest rates are a consideration, just like other costs and expenses that they may have. There are ways to manage that risk, and [they’re] making sure that they pay attention to the big picture and where they are trying to go.
We're coming off such an extended low-rate environment, that where we are right now, in the short term, has been a little bit of a surprise, but not totally unexpected. We are still in a relative historically lower rates scenario.
Q. You talk to a lot of businesses. What’s your sense of where are we in this moment, compared with the history of being a growing and thriving market? Are things right now full speed ahead, with nothing slowing down? Or are people thinking, “I don't know, there might be a recession around the corner?”
If a business owner or an executive needs to make a critically important or strategic decision and move forward on something, we’re not seeing any signs of broad-based pausing in that regard. People are moving forward. And I think that will continue.
Obviously, there are a lot of broader concerns out there that everyone needs to continue to watch and manage. But for right now, the business community in greater Charlotte is well-positioned, and we continue to see very positive signs.
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Executive editor: Tony Mecia; Managing editor: Cristina Bolling; Contributing editor: Tim Whitmire, CXN Advisory; Contributing photographer/videographer: Kevin Young, The 5 and 2 Project