As we head into what could be a challenging year for businesses, it’s essential for owners and leaders to have a strategy to weather times of economic uncertainty. We spoke with Paul Williamson, president of the Colorado region at UMB Bank, for his insights on the Denver market, business leaders’ sentiment, and how UMB is working with companies to financially prepare for 2023.

How is the Denver business landscape evolving?

While population growth in Denver has slowed due to the pandemic, it’s still one of the top 10 cities for economic growth according to Kenan Institute of Private Enterprise’s 2022’s Fastest-Growing Cities in the U.S.‡ report. The increase in startups‡ and the variety of growing industries in the area have continued to fuel growth and job opportunities that make Denver a great place to work and live.

We’ve seen continued interest in lending across the board from our Denver clients, which is evident in our most recent numbers. In the third quarter of 2022, we reached a significant milestone of $3.5 billion in average quarterly loan balances—a 127% increase compared to three years ago.

While Denver may be positioned for economic growth, there are still concerns regarding a potential recession. How are business clients reacting to the current environment?

Preparing for any condition that impacts your business requires sound financial planning, including economic uncertainty. We’re seeing clients prepare for several scenarios as we head into 2023.

The Colorado region might be on cautious footing as concerns about a recession play out, but many local businesses are in a healthy position today, and I expect it will continue despite the current environment. Some of our clients remain in acquisition mode, while others are evaluating a sale of their businesses with multiples remaining high in certain industries. Additionally, numerous sectors are still in growth mode, with owners’ general sentiment being that “business is good, but we’re still exercising caution.”

On the flip side, some local impacts may be felt in the short term, so we’re proactively working with clients to ensure they put themselves in a solid financial position.

What are some of the main areas you’re advising clients on?

Broadly, this includes items like establishing appropriate cash reserves, being more thoughtful on big investments, creating and reviewing contingency plans, reviewing staffing levels to ensure they’re appropriate for the business demand, and being mindful of inventory logistics and operational needs. More specifically, a few areas that have been consistently discussed with clients include liquidity management and payment options.

  • Liquidity management and optimization: As the impacts of the pandemic slowed and businesses rebounded, many now have more cash and liquidity but still need to figure out how to utilize it strategically. We’ve been advising clients to be proactive with their finances and assess current cash and income sources to determine how cash and liquidity can best be protected in anticipation of a more challenging year. We’re also working with clients to continue proactively reducing unnecessary expenses to free up extra funds should they need a higher reserve. And, when relevant, we’re also encouraging them to consider new ways to optimize sales and cash generation, which is finally providing some meaningful yield compared to recent years. Finally, we help companies optimize their liquidity through structured short-term instruments.
  • Business credit cards:While it’s not new, we’re having significant discussions with clients around business credit cards. The spending power and quick access to funds, rebates and rewards are very attractive for companies – especially in volatile economic times. Perhaps most importantly, business credit cards also allow companies to tap into benefits like increased administrative features and fraud protection—two critical areas from an efficiency and risk management perspective.

Given the current economic environment, how does UMB plan to approach 2023?

We see opportunity in 2023. As a bank that’s been in business for more than a century, we’ve successfully weathered economic uncertainty before, and we plan to do the same this time around. We recently hired Jeff Lenches to serve as our second commercial banking team lead in Colorado to help manage our ongoing local client growth. We’re seeing demand and success across all business verticals and sectors, which is encouraging from both a local economy and UMB growth standpoint.

We’ve also expanded our focus on small business with a team of specialists dedicated to this audience. This team is well-versed in the needs of small businesses and offers advice, solutions, and support at every stage. Our small business banking team resides in Colorado and has recently expanded its services to our broader, eight-state footprint. Given the increased needs we’re seeing in this area, we expect the team to continue its growth trajectory, which will hopefully require us to continue hiring for this team.

We are focused on building our talent pipeline for all areas, as we know our success is directly tied to having the best people. Our average tenure is nearly double the industry standard, enabling us to foster and grow long-term relationships and specific expertise internally and with our clients. It’s an exceptional differentiator from a workplace and client service perspective.

Final thoughts?

The next year will be important for Denver metro and Colorado businesses as we navigate a potential recession. During times of economic uncertainty, having a strong financial partner that has the desire, capacity, and ability to lend to support your company is critical.

While some industries may slow down, others will have a higher need for lending. A financial partner who knows you and your business is invaluable – especially if that partner is continuing to responsibly lend and advise based on your specific situation in the current market. This includes a partner who listens to your needs and concerns while providing creative solutions on how those can be most effectively addressed.

If you are interested in learning more about how UMB can help your business as a financial partner, visit our website.

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