What to look for in 2020? Here are the predictions from CDC’s management team

Company News

January 24, 2020

Everyone’s talking about predictions and the next big thing, whether it’s the hot new movie coming out in 2020 or which team will win the Super Bowl.

Of course, business is no different. whether you’re a small business owner, investor or a lending professional.

The management team at CDC Small Business Finance – our talented group of industry-leaders – has taken a hard look at the business landscape in 2020.

The big trends for 2020, they say, include the continued impact of small businesses on wealth creation, technology disruptions, potential for growth and an increase in SBA 504 lending for commercial real estate.

Let these thought leaders offer their predictions for what they see on the horizon this year:

Addressing the Racial Wealth Gap

Kurt Chilcott, President & CEO

In 2020, the mission-driven finance industry stands in a strong position to be a change agent and help address the racial wealth gap in our country. I expect that more impact capital will be directed to our organizations this year. With that in mind, it is critical that our industry maximizes the opportunity to deploy the financing and encourages small business ownership. Our efforts can make a powerful difference in combating income inequality in the United States. The U.S. Census Bureau reports that African-American business owners are, on average, more than seven times wealthier than their wage-earning peers. Similarly, Latino(a) business owners hold roughly four times as much wealth as non-business owners. These findings bring to light the tremendous impact access to capital and supporting business ownership can have on wealth creation.

Optimism for SBA 504 lending

Mike Owen, Chief Credit Officer and
Director of Business Development

Commercial real estate (CRE): As CRE enters the late stage of the current economic cycle, this will cause some concern for conventional lenders, and possibly create some slight cooling in their lending. Overall, I am optimistic about the value SBA 504 lending will bring to the table in 2020. The need for SBA 504 loans tends to be counter cyclical to general economic lending conditions – often offering the only game in town. Therefore when general conventional lending slows, SBA 504 picks up. We are able to help conventional lenders better manage the perceived CRE market risks.

Additional CRE Highlights:

Industrial investment continues to stay active with higher adaptive reuse and repurposing of existing CRE inventory that is available, along with demands for energy-efficient improvements.
Tenant demand and moderate growth in CRE office inventory buoyed by strong job growth, low unemployment.

Building equity

Kim Buttemer, Chief Operating Officer

Equity and reserves: 2020 is a great time for small businesses to focus on building up equity on their balance sheet. They also can add to or begin “emergency funds” for when down times come (not if – when). Successful entrepreneurs plan for rough patches so they can endure and even expand market share with their reserves. And having equity is usually needed to get growth capital. Get that small business piggy bank out and start stashing cash in 2020!

Uncertainty on tariffs, trade

Catherine Riddle, Chief Financial Officer and Chief Technology Officer

Interest rates: Not expected to change in 2020. While unemployment should stay below 4% and a recession is not expected, there is a great deal of uncertainty around trade, tariffs and the elections.
This uncertainty could stifle growth as businesses decide to play it safe. Small businesses may be challenged in finding employees, but will benefit from maximizing technology and accomplishing more with less.

Impact on small-business lending

Robert Villarreal, Executive Vice President, Community Development and President of CDC’s CDFI

Community Reinvestment Act: There will be a contentious showdown regarding the proposed changes to the CRA. In mid-December two of the three financial regulatory agencies published their proposed changes. While updates to the CRA are needed, particularly to address the way banking has evolved in the last 20 years, many of the recommended proposals as presented are potentially damaging to the communities mission-led organizations like CDC Small Business Finance serve. With the election and other national issues taking center stage, this issue may go unnoticed by the general public, but it has a tremendous impact on small-business lending and investments and ultimately on access to capital for small business owners. In addition, during the election in 2020, the racial wealth gap will be an issue. The ability of small business ownership, in diminishing that gap, will be prominent.

Cybersecurity: Business owners need to be aware of this danger and take the proper precautions. There will be continued attacks on small businesses, as they are seen as vulnerable.

Resisting the lure of fast financing

Susan Lamping, Vice President, Sales

Fast money: Online lending – peer-to-peer lending and crowdfunding – will continue to grow. But if you or a client take that route, make sure to understand the terms of the loan. Don’t just take a loan because you can get it in two days. Be educated before falling into the lure of fast financing.

Technology: Generation Z will enter the market. Since they were born into a world of technology, they will demand more technological services at a higher quality. The market will deliver. Automation and online delivery systems will continue to improve and grow as a way to boost the customer experience, with faster responsiveness and detailed information on each customer readily at hand.

New laws, regulations

Chuck Sinks, Senior Business Adviser

Awareness of new laws: It is critical for small business owners to be aware of regulatory and compliance changes that came their way Jan 1. It takes time to understand new laws or regulations and consider how they may affect the business. Once owners identify the costs or other requirements, they will want to update business plans, cash flow predictions and their operating expenses. This will ensure that they have a clear look at the costs they will incur in the coming year.

In case you missed it:

CDC Small Business Finance offers several loan options for business owners who want to grow their operations and are planning for their long-term needs. Contact our loan experts about your business needs, and they’ll work to match you with a financing plan that best suits you. Reach us at loaninfo@cdcloans.com or (619) 243-8667.