Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Sep 25, 2012

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Thanks to economic uncertainty, savings is more on the minds of Americans than spending. Likewise, business owners are more inclined to consolidate operations instead of expanding them.

These changes may save money for average Americans and business owners, but they also result in lenders, such as banks, competing for fewer customers.

Competition for commercial loan borrowers in Fort Wayne, IN has heated to the point of becoming “pretty aggressive,” according to Mike Cahill, President and CEO of Tower Financial Corp, in an interview with the Journal Gazette.

Ron Hostetler, business banking manager for Wells Fargo in Indiana agreed that lenders are aggressively competing to build up their commercial loan portfolios.

“We want to make every good loan we possibly can make. We lend to all industries and all businesses. What we want to lend to is well-managed and profitable companies,” he said.

However, most business owners who have paid down their debts are understandably reluctant to take on new commercial loans in the wake of ongoing economic uncertainty.

“I think a lot of people are just kind of holding back,” said Cahill.

Other industry insiders commented on the face that while some businesses are able to borrow a commercial loan, that does not necessarily mean that they will.

“Businesses have been pretty reluctant to expand and build up inventories with the economy the way it was,” said Rob Lasley, the Indiana Bankers Association’s vice president of products and services, reported the Journal Gazette.

Lasley noted that across the state, banks were competing for borrowers who were able to afford higher down payments and meet bank policy requirements.

Fortunately for lenders, business reluctance may have begun diminishing.

Consumer confidence improved in September to 79.2 percent from 74.3 percent in August, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment. Consumer confidence is a reflection of economic optimism. As a statistic, it is of high importance considering that consumer spending accounts for roughly 70 percent of the U.S. economy. A consumer index benchmark was set in 1985 at the level of 100. At the height of the recession the index averaged 64.2 percent, while just five years prior it averaged 89 percent.

Commercial loan borrowers may also be seen to be gradually more confident.

The Commerce Department estimates that business inventories rose by 0.8 percent in July while sales increased 0.9 percent. All business inventories rose to $1.59 trillion.

An increase in inventory and storerooms implies that businesses expect sales to increase. A demand for more products results in increased manufacturer demand which requires hiring more workers to meet. This could cut the unemployment rate, which stood at 8.1 percent in August.

Many companies have run into debt-to-value problems after the real estate market collapse but business owners with a solid history of payments can still be good borrowing prospects noted Cahill. Cahill commented that any business that survived the recession has shown real resiliency, a fact that many business owners should take to heart.

Some of the banks in the Fort Wayne region reported an increase in commercial loan lending in the months of April, May and June when compared to the same period in 2011.

For example, Lakeland Financial Corp. saw an increase of commercial loan lending of 4 percent reaching $1.88 billion. Warsaw bank saw an 8 percent increase reaching $789 million. Fifth Third Bank saw an increase of commercial loan lending of 8 percent reaching $32.7 billion.

The Federal Reserve has decided to aid business owners by purchasing $40 billion in mortgage-backed securities. The Fed has pledged to continue gobbling up $40 billion worth of mortgages every month until the economy and the unemployment rate improve. Purchasing these securities will remove them from the market, meaning that banks, corporations and investment funds will be forced to seek investment opportunities elsewhere. This will result in enterprises or established businesses receiving much needed investments that can boost the economy.