Rising interest rates and inflation are having a major impact on the economy to start 2023, but the Fed’s intentions to slow its interest rate hikes is a promising sign for those who are concerned about a recession this year.
Hi, I’m Caleb Thompson, a business development officer at eCapital. This is my first video update and I’m excited to bring the latest finance and industry news to you in this new way. So let’s jump in!
First off, we all know that rising interest rates and inflation are having an impact on the economy. But the Fed’s intentions to slow its interest rate hikes is a promising sign for those who are concerned about a recession this year.
With unemployment around 3% and inflation down 6%, there’s still hope the Fed can maintain a soft landing. So how is that affecting some of the key industries that eCapital serves?
Transportation and manufacturing are both dependent on consumer spending. Consumer spending in part revolves around interest rates and inflation. Higher interest rates make it more expensive to finance purchases and higher prices on essentials, like fuel and food, crowd out spending for other items. With consumer spending down and interest rates up, these industries are experiencing a slow start to 2023, with a shift in transportation towards dedicated capacity and contract rates to maintain stability. We are also seeing more owner operators move towards employee drivers to service the increased demand in contract freight.
In the manufacturing space, the last few years have taught us that we need to be more resilient to supply chain disruptions. The focus for manufacturers will be on leveraging technology, including AI and machine learning, to increase efficiencies and processes. That being said, here’s my summary of what I think we can expect over the next few months.
Let’s start with some of the positives. First, ongoing fleet demand. We may not be at the levels that we’ve been at the last couple of years, but demand is stable. Second, stable consumer spending and expenditures. Again, the pace is slow, but that’s to be expected. We’re kind of in a wait and see mode right now. Third, unemployment. Although there have been some significant layoffs over the last couple of months, unemployment does remain low and this is a great sign. Now, let’s get to some of the challenges.
Supply chain issues. Things have improved, which is good, but improvements are slow. And, we certainly have seen economic uncertainty. Are we in a recession or not in a recession? The debate continues, but businesses and consumers are both taking a fairly cautious approach. So in this environment, the question is how can eCapital help a business succeed?
Well, first and foremost, we are working capital experts and we all know that working capital is what keeps a business running. As businesses fall outside of the traditional bank credit box, we’re certainly here to help. I’m grateful to work closely with bankers who refer their clients to eCapital when the bank is unable to extend credit for a variety of different reasons. It may be that a business no longer meets loan covenants, or maybe they don’t have sufficient credit history, or maybe the business just needs to leverage some assets in a way that a bank is not comfortable with.
Let me take you through a couple examples that we’ve recently seen. One of eCapital’s bank partners just got in touch with a referral for a health care staffing company. This particular bank was not able to help the company because they were a little bit outside of the bank’s credit box. This company was looking for a more affordable payroll solution. eCapital was able to offer them a 30% increase in that facility, along with a significant reduction in the amount of fees that they were paying with a competitor.
In another example, a banker introduced us to a client that was a newly established manufacturing company. This company was experiencing rapid growth. Their lack of credit history meant that the bank just wasn’t super comfortable with it. eCapital was able to come in and give them a $500,000 facility right away. This facility has already increased to $2 million.
Examples like these are what make us a great financial partner. We’re fast. We’re flexible. And we give businesses capital they need. Well, that’s all for this update. I hope you found this information helpful. And I welcome the opportunity to speak with anyone who might have questions about how eCapital can help your clients or your business.
So let’s connect soon. Until the next time. All the best.