With the recent United States imposition of tariffs on Mexico and Canada, and others expected soon, banks have a unique opportunity to help their business and commercial customers weather the storm and even thrive. There are five key questions banks should be asking themselves to ready for and improve success in this time of transition.
- What is the impact on my current borrower base?
How well do you know your business and commercial customers and where are they most impacted? From alcohol and spirits related industries to manufacturing of all types to automotive related concerns, mutual tariffs stand to clog up previous product movement and reduce deal flow. If your customers are in these industries they’re anticipating significant impact.
This is a great test for how well your bank knows its customers: What has your connection looked like with them? When was the last time we connected with them? Was it just for the annual file update or do I have regular check-ins to see where we could be supporting them? Even with less frequent engagement, an outreach now would be welcome as these heavily impacted customers will be looking for more support in their corner. - Which borrowers are most impacted and may be at risk?
List the top ten customers that are most likely impacted – how easy was it to find the information and make the decision? Can you sort your customers by NAICS code and then stress test easily? Are there others that – because of the likely increased cost of energy will be impacted due to logistics challenges or increased shipping costs? These questions – and, ideally, an ongoing monitoring of your most risked customers as well as your best customers should be a strong starting point. - What services can I extend to help borrowers get through potential impact?
Otherwise strong borrowers with good fundamentals that might be facing a temporary liquidity crunch or spike in component materials might benefit from an extended line of credit or deferred payment terms. Others might need support with trade finance or cash management services. Starting from a place of knowing the customer, knowing their industry and then coming to the table with smart solutions can be a big help and strengthen the overall relationship. - Where can I collaborate with partners to bring even more services to bear?
Are there other related services that the bank can connect customers with that will benefit the customer and show the overall commitment the bank has to its borrowers’ success? For those businesses in increased trouble, are there advisory services that can help reboot or spot-target areas that can get the customer through the challenge? Are there fellow bank customers that could collaborate and strengthen their individual positions? Banks are in a strong position to not only help connect the dots for borrowers but also strengthen their position by strengthening the chances for success of its borrowers. - What do we need to do – as a bank – to protect from potentially worsening conditions?
In some unfortunate cases – this tariff challenge will be one issue too many for businesses pressed by earlier economic conditions, earlier cheaper credit and mismanagement. As banks dive deeper into better understanding borrowers it will be essential to take quick action to protect the overall portfolio. Whether that is seeking special-asset-as-a-service support or looking to move the loan before it becomes unmovable, having a partner with the right connections and insight will help showcase the triggers for these moves and provide the needed data for banks to
make their own, informed action.
Asking these questions is important for banks to do in any market but especially in times of market uncertainty and transition. Having the right insight into borrowers and the overall portfolio can mean the difference between front-footed engagement that drives profit increases and protects against exponential loss, and reactivity that leaves customers and the bank exposed.
Cenerus provides banks of all sizes with a path for more profit in any market condition. With deeper, whole-company and market insight into borrowers as well as easy-to-use insight that drives action, Cenerus helps banks thrive, extend customer relationships and bring more products to bear proactively.
Let’s talk and we’ll show you – in just a few files – where Cenerus can increase profits and make a meaningful impact with your team and your customers today.