In the wake of an expected wave of defaults by U.S business borrowers, the nation’s lenders are best advised to apply risk management practices to set the stage for long-term growth when issuing new loans and participating in federal lending programs.
That’s according to Wolters Kluwer Lien Solutions, writing in a new Thought Leadership article published in The Financial Times’ Banker magazine.
Setting the stage for long-term growth should be top of mind for every lender, given the ongoing COVID-19 pandemic, Wolters Kluwer notes. Those lenders who successfully balance surviving the next three to six months with making the right longer-term decisions for their shareholders, employees and customers will be well-positioned to benefit from the subsequent recovery and growth phases, which could last several years.
“Ultimately, the COVID-19 pandemic is an opportunity for lenders to differentiate themselves from the pack,” notes Raja Sengupta, Executive Vice President and General Manager for Wolters Kluwer Lien Solutions and co-author of the article. “The health of the borrower base, critical flaws in existing infrastructure and the ability to maintain compliance have been exposed, yet with careful planning, weaknesses can be shored up and the stage can be set for long-term growth with access to guaranteed loans and potentially weaker competition. Careful balancing of short-term survival and a long-term outlook could prove to be a windfall in the years ahead.”
Lenders should be encouraged to work with their borrowers as this provides a critical opportunity to reduce risk on existing loans by way of increasing underlying collateral, ultimately strengthening customer relationships. “Customers remember businesses that helped them in times of need,” Sengupta adds.
The Banker, published by The Financial Times, provides economic and financial intelligence for the world's financial sector and has built a reputation for objective and incisive reporting since 1926. The Banker has navigated its way through over 90 years of banking coverage from the Wall Street Crash of 1929 to the financial crisis of 2008 with the same reputation for accuracy, authority and integrity.