Miami Today
By Abraham Galvan
April 11, 2024
Local bankers are seeing a slight uptick in small- to mid-level business loans.
Businesses have more of a positive outlook because interest rates will be coming down a bit this year but it’s still very slow, said Frank Gallo, the senior commercial leader of Tropical Financial Credit Union.
“People aren’t jumping out of their seats to go borrow money because the rates are still high, comparatively speaking, but there has been a level of what the market is calling acceptance,” he said. “Businesses are starting to accept that the interest rates are going to be a little higher than what everybody’s been used to over the years. But at the same time, business owners really have a positive outlook on the interest rates that could possibly reduce later this year.”
Even though the federal government has announced four different rate cuts this year, smaller businesses won’t necessarily see those in 2024 due to inflation concerns, but a level of minimal reductions might happen, Mr. Gallo explained.
“The prices of things are still elevated. Everything from the price of real estate to the price of gas and food and everything in between,” he said. “So, what we are seeing is a little bit of an uptick, but it’s been a cautionary tale.” There’s another side of the coin that is called a market of necessity, Mr. Gallo said.
“In other words, business owners are not going to borrow money unless they really need it. They are proceeding with caution, doing things when they need to,” he explained. “The biggest driver in 2024 is expected to be people that are refinancing businesses and loans that are maturing. Some of these interest rates are adjusting over 10%. So, if you were to go get a loan right now, let’s say our credit union, we’re below 7%. So, that would make a lot more sense.”
Larger banks in general have pulled back over the last year quite a bit on the commercial real estate side, and those small businesses that have a commercial real estate component to it are looking elsewhere, said Daniel Sheehan, president of Vista Bancshares.
“We’re just seeing more and more demand for that because the debt capital availability has been a lot less this past year,” he said. “We are seeing a pickup in commercial and industrial lending and residential lending. I still believe that there are some long-term factors that don’t necessarily have to do with interest rates movements or deal with geopolitical events that are still going to make Florida a great place for people to move to and start a business.”
Currently, a lot of people are still moving to South Florida, and that is directly correlated with a lot of small businesses, added Nelson Hidalgo, executive vice president and head of corporate banking for Banesco USA.
“Whether it be construction companies that provide the construction materials or labor or so forth, the demand is as great as it’s ever been, and it’s gotten tougher because a lot of larger regional banks have pulled back from lending and being extremely selective, which is allowing us to have this new customer base we haven’t been able to target in the past,” he said.
“I don’t think anybody is comfortable with interest rate costs, but that is our reality and we’ve got to deal with it and what normally happens, it gets passed along to the consumer,” Mr. Hidalgo continued. “But at the end of the day, you’ve still got to function, and you still have to go ahead and look to see where you can save your dollars, but it’s not something that I believe will put more people or companies out of business. I just think it’s going to make them harder to operate and be as profitable as they should be, or they can be.”
The federal government does not get involved in any type of political action where it can be looked at as one political side benefiting from it, he said, so they usually tend to keep rates the same, especially during an election process.
“But toward the latter part of this year, especially after the election and going into next year is when you’re going start to see those recently announced rate cuts,” Mr. Hidalgo said. “Even with all the negative factors the economic cycle brought, this economy is so resilient. We keep adding jobs. We keep moving forward, especially down here in the tri-county area, which is one of the best-performing markets in the country.”
