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By Nathan Peck | MiBiz
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WEST MICHIGAN — Slowed demand for commercial loans has meant a tougher lending market for the area’s banks.

As businesses slashed capacity and moved a conservative strategy to get through the recession, they’ve grown back into that capacity over the last 24 months. That has meant that those companies that are growing are funding much of their growth internally, having socked away cash as their balance sheets improved.

George Bailey, EVP of Commercial Banking at Fifth Third Bank for West Michigan, said that competition is getting fierce for good borrowers.

“From our standpoint, the number of banks looking for loans has increased significantly. The competition is as hard as it has ever been in my career,” Bailey said. “Our pipeline is good, but there are too many banks looking for too few loans in an economy that isn’t growing.”

Bailey looks to growing deposits and a commitment level hovering around 37 percent as signs that companies are taking a conservative approach, keeping their assets liquid rather than investing right now. As manufacturing has rebounded, businesses have not needed loans to expand to meet growing orders.

“Historically revolving usage has been 50 percent or more. Customers are not tapping into the revolving line of credit. We are growing. Deposits really have gone up year over year. Deposits are up to all-time highs. Businesses are very conservative in their approach,” Bailey said. “My loans are not growing as much as I’d like them to. Customers are holding onto cash in this environment.”

Michael Manica, president and CEO of United Bank, said that there has been some misperceptions around financing growth and restructuring debt.

“The lending environment is one of low demand. I think that using the term access to capital (addresses) only part of the question. Capital for expansion is available,” Manica told MiBiz. “There are very reasonable terms for anyone in our market. Access to capital to fund losses over the last two years is another question. If there is a prospective business with a strong business plan, you will find a bank that is willing to work with you.”

Manica is troubled by a slow recovery in employment, with persistent high unemployment driving down consumer sentiment and demand.

“I believe our political class needs to focus more strongly on job creation. Blaming higher productivity for high unemployment is a false premise. We have to come at the cutting edge of productivity. The idea that we are going to compete in a place where we put 1,000 items into a box is gone,” Manica said. “Most of what ails us would be fixed by new jobs.”

Garth Deur, president of the The Bank of Holland, echoed those sentiments.

“We are absolutely ready to lend money. We have plenty of liquidity, plenty of capital. We are actively pursuing new relationships, but there is very limited loan demand currently,” Deur said. “There is no appetite, or at least very limited appetite from any sort of bank, for any sort of development lending. There is not really demand for it, either.”

A conservative lending strategy and investment in gaining expertise in SBA and USDA loan programs has put the bank in a position to take advantage of opportunities as the economy has rebounded locally.

“We never stopped lending, while several institutions did. They put things on hold while they sorted out their issues. With the emphasis we put particularly on the governmental lending programs, SBA and USDA, (we have) historically done well, helping specifically small businesses looking for new sources of capital.”

For Kennedy Fillar, regional president at Comerica Bank in Kalamazoo, businesses are just starting to replace equipment, and that is a good sign as the country slowly emerges from the Great Recession.

“A big chunk of our customer base shrunk themselves to get through the recession. Many of them are still not growing and not borrowing anymore,” Fillar told MiBiz. “Many are getting ready to replace worn out machinery, but that is just starting to happen. It is not spurring very much demand. This is all normal coming out of a recession. The hard part is we’re waiting for the cycle to gain momentum.”

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TAGS:

• bank of holland
• comerica bank
• fifth third bank
• garth deur
• george bailey
• kennedy fillar
• michael manica
• united bank
• west michigan