While we’ve touched on the health in the banking sector (or lack of it) in several previous articles, it may be time to take this discussion up a notch. For business finance consultants and brokers, problems with banks and their ability to lend literally corresponds to exponential increases in on our earnings potential. We know banks are in trouble. The issue is, is that trouble already here?
High interest rates are causing chaos in real estate industry lending. Current interest rates are exerting enormous pressure on the balance sheets of our largest financial institutions. As a result, banks are being forced to get very tight with their money. They simple are not making loans. They are also closing down hundreds of branches and are laying off thousands of workers. In fact, many now think we may be in early stages of the worst financial crisis since 2008 and 2009.
First Week of October: Banks Shut Down 54 Local branches
That’s right! Major US banks are currently continuing close branches across the US. Bank of America shuttered 21 branches in the first week of October alone, according to the Office of the Comptroller of the Currency (OCC). This occurred October 2oth, leaving an increasing number of Americans without access to basic financial services. Wells Fargo shuttered 15, while US Bank and Chase reported closing nine and three respectively. In total, some 54 locations had either closed or were scheduled to close between October 1 and October 7. That is just one week!
Worker Layoffs
According to a recent report from CNBC, the largest American banks have been quietly laying off workers all year. And for many in the know, some of the deepest cuts are yet to come. As a result of the impact of higher interest rates on the mortgage business and Wall Street deal-making failure due increases of funding costs, five of the largest U.S. banks have cut a combined 20,000 positions so far this year, according to company filings.
Bankruptcies and Home Foreclosures
At this point, it is obvious that the economy is not headed in the right direction. During the early months of this year, the number of commercial Chapter 11 bankruptcies has been skyrocketing. A wide array of U.S. businesses have struggled this year to the extent that in the first nine months of 2023, commercial Chapter 11 bankruptcies have soared 61% year over year to 4,553, according to Epiq Bankruptcy, which provides U.S. bankruptcy filing data.
Sales of previously owned homes dropped 2% in September from August to a seasonally adjusted, annualized rate of 3.96 million units, according to the National Association of Realtors. Sales were 15.4% lower compared with September 2022. This is the slowest sales pace since October 2010, during the Great Recession, when the market was in the midst of a foreclosure crisis.
And speaking of homes, are you aware that home foreclosures up 34 percent compared to the same time in 2022. Home foreclosures are on the rise which is tied directly to Americans continue to grapple with the ongoing on going inflation and the cost-of-living crisis. That foreclosure report is according to data provider ATTOM, which found that foreclosure filings, which includes default notices, scheduled auctions and bank repossessions, surged 28% in the third quarter to 124,539.
Brokers and Consultants: What Does That Mean for You?
For those that are IACFB Magazine subscribers, you should be fully aware that this is an issue of “growing”. The rapidly growing banking crisis also means rapidly opportunities for you. The factoring and alternative commercial finance industry literally explodes with opportunities when banks will no longer loan to small business. For you, this is the time to…
- Build your connections on LinkedIn and in particular, with the local loan officers around you. You should have done this long ago but if you haven’t, build those connection NOW!
- Start a mail campaign to small business owners in your area and especially those that you can connect to on LinkedIn. We recommend low cost door hanger campaigns backed up with an informative booklet on your website.
- Get involved with alternative products such as merchant cash advance products and small business term loans. These loans types and advances open doors to provide loans to retail operators rather than just B2B factoring clients.
- Start posting on your website’s blog and also consider writing articles on LinkedIn. LinkedIn articles dramatically expand your reach as opposed to normal posts.
- Backlinks…Backlinks…Backlinks. The opportunities to reach new clients and build you business during our current challenging economy do not come often. Double down on your blogging and backlinks for your posts and articles. The work you put in today in this challenging economy with pay dividends for years and years to come.
