Mike Marz on How Small Business Owners are Weathering Todays Economic Uncertainty
Monday, September 12th, 2011
With uncertainty clouding the economic outlook, small business owners with cash reserves are increasingly using those assets to fund their business needs rather than take on new debt. According to Mike Marz, Market CEO and President and Commercial Team Lead for SunTrust Bank in Albany, declining balances in business deposits reflect this trend.
“Small business loan demand is not where I’d like it to be,” Marz said. “Businesses that could qualify for a loan are not borrowing.”
Marz continued, “The quality for the credit applications we are getting today does not compare well with the quality of the applications we received four to six years ago, as the weak economy has taken a toll on the balance sheets of many small businesses.” Lending standards are higher than they were four to six years ago and more in line with standards from 30 years ago when Marz entered the banking business. Standards include having a good credit record, equity in the business and the ability to repay the loan.
“Businesses that are struggling today and are trying to take on additional bank debt to get out of that pattern would do better to raise capital,” he explained. “Although unfortunately the business owner may not have additional funds to contribute or access to other capital.”
SunTrust and all banks face competitive pressure to deploy their deposits in profitable loans. In particular, small business loans are a high-priority market segment.
“Small business is the route for America to get back on its feet and SunTrust believes it can add value to small businesses. We have a full court press on to help qualified small business owners,” Marz said.
Based in Atlanta, SunTrust Bank provides deposit, credit, trust and investment services to a broad range of retail, business and institutional clients. The company has more than 1,660 full-service bank locations in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia and Washington, D.C. The bank’s holding company, SunTrust Banks, Inc., had total assets of $172.2 billion as of June 30, 2011.
Low rates drive brisk mortgage business
According to Marz, the mortgage business has been brisk so far in 2011 and he expects it will remain strong given the low interest rate environment. Refinancing of existing mortgages is driving the business while new purchase activity remains slow.
“I personally refinanced my mortgage three years ago and I could probably refinance again today and lower my rate,” he said.
“Consumers have so much more information today than they did 20 to 30 years ago. They are much more inclined to refinance their mortgages to improve their cash flows.”
With the Federal Reserve indicating it is likely to maintain low interest rates through mid-2013, refinancing activity could remain high for the next few years. That, more than any kind of recovery in the housing market, will drive the mortgage business in the near future, according to Marz.
“It’s a buyer’s market in real estate and there are some deals to be had, but consumers are nervous about jobs and the economy. That’s negatively impacting the housing market and I don’t see a recovery until the job situation improves,” he explained.
Allowing businesses to expand
Marz believes government at all levels needs to allow businesses to operate and expand without a heavy regulatory burden that can drive additional operating costs.
“When companies move their operations to other countries to take advantage of lower operating costs, it hurts the U.S. economy,” he said.
“I also think it starts with education. We need to get our population educated and prepared for the jobs that will be available in the future. That may mean retooling our education system toward more specific skills.”
More information on SunTrust Bank is available at www.suntrust.com or contact Mike Marz at [email protected].
