Businesses — no matter the size, industry or focus — all have a few things in common. Every business needs to offer a product or service — they all need customers and every business needs a bank.
In fact, banks are so critical to business, they serve as a barometer of business in a region. Southern Illinois is no different.
“As a whole, I think most of the banks in Southern Illinois are having a good year,” said John Dosier, president of First Southern Bank.
Other banking leaders agree.
“Most banks are faring pretty well,” said Robert Bleyer, president of The Bank of Carbondale. “Banking is strong in our region.”
John Barnett, commercial lender with First Mid-Illinois Bank calls banking across the region “very strong,” and adds that commercial lending is doing quite well.
All of the bankers, however, said that for start-up and small businesses seeking financing, things are a little tougher.
“Many borrowers are seeing that credit restrictions are really tough now and some ‘borderline’ businesses are having trouble getting financing,” Barnett said.
Dosier said his financial institution is seeing growth in small business lending.
“I wouldn’t say that small business lending is tougher than it was, but most banks are going to do their homework and make decisions accordingly,” he said. “Banks in our area, especially community banks, tend to look for ways to make loans rather than turning them down.”
He adds that “homework” means careful analysis of the things applicants have always needed to provide prospective lenders.
“Those things haven’t changed. We need a good business plan, proper financials, a description of projected cash flow and we have to look to see if there is collateral and if the business plan makes sense,” he said. “Really there is nothing new; it is the same requirements that have always been there.”
Bleyer points out that careful study in the lending decision-making process is required because of increased banking regulations, but he said money is still available.
“If you’re starting from scratch, the big thing is the business plan,” Bleyer said. “We want to see a good understanding and background of what the business is, the expertise of the people or person behind the business, an understanding of who the potential customers are and what is the potential demand for the product or service. Of course, we also need to know the projections on revenue and the expense structure.”
Barnett said start-up businesses naturally are going to be analyzed a little more carefully. For that reason, he recommends entrepreneurs get a little help in planning and developing their businesses.
“Lending from the Small Business Administration mitigates some of the problems, so we have to supplement or substitute a little less,” he said. “If they have worked with a Small Business Development Center, that’s a big plus. Start-ups need the guidance and flexibility that established business don’t need.”
He adds that to get business financing, business owners really have to understand their markets and be extra careful in making projections.
“Have a pretty good plan — on paper, not in your head — and know your business,” Bleyer added.
Washington and Springfield
Local banking leaders say increased federal regulations on financial instructions and banks has put a squeeze on lending, but so has the Illinois state budget impasse. While there is talk of changes in both arenas, nothing is certain.
“Banking is very complicated nowadays,” said Claudia Choate, vice president for marketing of Murphy-Wall State Bank and Trust.
“We’re hearing a lot coming out of Washington about potential deregulation, but none of it has come to fruition yet,” Barnett said. “We’re seeing a little bit of increase in consumer confidence, but nothing has changed yet with the Trump administration.”
Bleyer said the increased paperwork and regulations are making things tough for smaller banks.
“I think we will continue to see consolidation among banks and that is strictly due to the regulatory environment,” he said. “Unless something changes with the regulation burden, you are going to see more and more banks not be able to put up with it and they will be looking to merge. It’s becoming difficult. You are going to need to have banks big enough to have staff just to deal with the regulatory burden that exists.”
He said he would be surprised to learn that nationwide a bank closed or merged every day.
Pair federal red tape and rules with the lack of a state budget, and the result is fewer loans for Southern Illinois businesses.
“The uncertainty of the economy and the way the state is right now, certainly is making for more hesitation by the lenders,” Dosier said.
Barnett said he is seeing the impact of the lack of progress at the state capitol.
“Springfield is making it very difficult to lend to hosptials, doctors and even funeral homes — anyone that gets payments from the state. Contractors who rely on the state for payment are in jeopardy of not being able to get financing if they are going to have cashflow issues. We have to take that into consideration.”
Dosier said while the banks have money to lend, some businesses are not looking for loans right now and may not until there is a state budget.
“For the most part, we continue to see growth in small business lending, but there is some uncertainty there as well. Many business are holding off on projects or expansion until they see what is going to happen,” he said.
Bleyer said the state budget crisis may be having the biggest impact in Carbondale, where Southern Illinois University is, as he calls it, “by far the biggest economic engine.”
He said as the university suffers so do the businesses in the community — the same businesses that would turn to his institution for ways to fund growth or expansion.
“It has a substantial impact on the economy and on the banks as well,” he said.
Dosier keeps coming back to the word “uncertainty.”
“That’s certainly the best word,” he said. “With the general uncertainty that comes with no state budget and what the impact will be on schools and SIU and with medical providers not being paid, everyone has to deal with uncertainty. In Southern Illinois, we are pretty resilient, but it’s tough. I think everyone is struggling with finding growth because of what is happening on the state level.”
Regardless of the rules and the budget crisis, Dosier said banks in the region have money available and are ready to make loans to credit-worthy businesses and entrepreneurs.
"In general, banks are looking for ways to make loans,” he said.