Promising Capital Outlook Amid Economic Uncertainty (Sponsor Letter)

Joselyn Baldner, President & CEO, Central Bank of the Ozarks

According to Springfield Business Journal’s 2023 Economic Growth Survey, businesses have shown a positive outlook on their financial stability and capital requirements. This is a good indicator as our local economy shifts from a post-COVID-19 landscape and into an inflationary period with rising interest rates.

Despite the supply chain issues, labor quality, rising costs and other challenges we all face in this economic environment, there is light at the end of the tunnel. As a banker, a few questions that jump out in the survey that point to a robust business landscape include respondents’ plans for raising capital in the near future, their preferred sources of funding and cash flow.

Capital and preferred sources
According to the survey, 25% of respondents indicate they plan to raise capital in the near future. This represents a good portion of local businesses that are seeking to expand their operations or invest in growth opportunities. This speaks to a positive outlook among the many entrepreneurs and corporate leaders in the area who have the confidence and ambition to keep moving forward.

When asked about their preferred source of capital, banks emerged as the top choice for 22% of respondents, including 17% relying on a line of credit. This finding highlights the continued importance of traditional financial institutions and the role they play in the local market and economy. As a local bank, Central Bank plays a vital role because of the flexibility and local decision-making we provide. We are also a trusted source because of our stability, accessibility and various financial products that we can tailor to meet the needs of local businesses.

Financial position
Despite the interest in raising capital, an overwhelming 60% of respondents stated that they do not plan to seek additional funding in the near term. Coupled with another response that revealed a positive trend in terms of sales and profits for local companies, this points to a substantial number of businesses in the area that are currently operating in a financially robust manner, with ample cash reserves at their disposal. Especially so, since more than half of respondents claim their companies could endure the current economic climate indefinitely with the cash they currently have on hand.

When factoring in those who believe they can survive for more than six months, a remarkable 3 out of 4 businesses are projected to remain stable with sufficient cash reserves well beyond the end of the year. This is perhaps a good indicator that the local economy is thriving and is stable despite our many challenges. As the Federal Reserve continues to raise rates to fight inflation, it’s natural to rely on cash instead of seeking funding. Businesses are now faced with the challenge of utilizing their excess cash wisely. With various investment options and potential risks ahead, it becomes essential for businesses to make informed financial decisions. Banks can play a valuable role as an adviser in this situation.

The SBJ survey results are in line with the 2023 Liquidity Survey Report from the Association for Finance Professionals, which emphasizes the significance of safeguarding cash and maintaining liquidity as primary investment objectives this year. Finance executives rank protecting cash, 63%, and liquidity, 33%, as their top primary investment objectives for the remainder of the year. This reinforces the importance of being prepared for potential downturns or unforeseen challenges in the local market.

Looking down the road, as the local economic landscape continues to evolve, businesses large and small can be reassured that they have strong financial foundations and access to capital and, more importantly, expert guidance from trusted local advisers to help them along the way.