As business leaders and consumers continue to grapple with rising interest rates, inflationary pressure and other economic uncertainty, forecasts aren’t all doom and gloom. The Dallas-Fort Worth (DFW) market, in particular, shows signs of continued growth, according to Dennis Wright, president of UMB Bank’s Dallas region.

“I think the broader U.S. population is convinced there might be some hard times ahead,” Wright said. “Inflation is causing some issues. Rising interest rates are going to be impactful to the economy, jobs and other things as we try to combat inflation. But as we look closer to home, many of the business leaders we talk to are confident Texas and DFW will fare better than other parts of the country and are cautiously optimistic about their businesses in the coming year.”

Optimism despite headwinds

Texas isn’t immune to global economic factors. Growth has slowed statewide in the second half of the year, according to the Federal Reserve Bank of Dallas. Manufacturing production continues to grow but at a declining rate, and services firms are seeing revenue grow at a below-average rate.

Yet, UMB is continuing to see growth among many of its business clients. Similarly, the bank is also expanding its presence in DFW by adding to its middle market team in Dallas. It recently named two key hires: Eddie Broussard as president of the Fort Worth market and Jeff Strasner as senior vice president and commercial banking team lead in Dallas.

As part of its business services, UMB provides regular economic and market updates to customers and organizes events where business clients can meet their peers and participate in facilitated discussions with C-suite executives in other industries. These conversations also reveal that while DFW is experiencing similar headwinds, the business climate remains strong, Wright said.

“Capital, jobs and people are still flowing into DFW,” he said. “It’s an attractive place to set up your company. It’s also an attractive place to raise a family. A lot of things have gone right for DFW during the past 20 years, and I feel leaders are continuing to do the right things to prepare our region so we can continue growth and maintain diversity.”

Three ways to prepare for potential challenges

While the overall outlook among most DFW-area business owners is positive, that doesn’t mean leaders aren’t making adjustments. Wright said UMB has seen a slowing in some parts of the economy, along with businesses increasing their borrowing, due to inflationary pressure.

“Everybody is being cautious and evaluating how they might be impacted by continued inflation and high interest rates,” he said. “It has caused some to modify their plans and others to make more significant changes in how they plan to spend and allocate capital and other resources in the coming year.”

Wright said there are three things businesses can do to help position themselves for success despite economic uncertainty.

1. Evaluate credit needs and interest rate risk.

As the economy changes, businesses need to stay nimble when it comes to liquidity, debt management, inventory and accounts receivable plans. Cash flow is critical, which means evaluating spending and revenue streams.

Working with a trusted banker can help organizations ensure they have enough borrowing capacity to weather changes due to inflation and any potential economic downturn. That relationship also can help companies mitigate interest rate risk.

“For example, if businesses have permanent debt capital on their books versus a revolving line of credit they fund and pay completely off, we always recommend determining a scale of how much floating and how much fixed-rate debt they want to have,” Wright said. “That scale is different in the current position, where we’re looking at the likelihood that companies might see lower rates at some point in the future.”

2. Increase payment automation.

Companies of all sizes face the threat of fraud. Financial services providers can help mitigate this risk by helping clients implement systems that automate payment processing, Wright said, eliminating human error and removing some avenues for fraudulent payment activity.

“Fraud is rampant in every way, shape and form, but check fraud is still happening with regularity,” he said. “To the extent possible, companies should move their payments to other streams that are less costly and present far less risk. We have a great team that advises our clients with this and helps them achieve strong adoption from their vendors.”

3. Work with a financial partner that watches your blind spots.

A strong partner takes a proactive approach to working with clients and helping them establish a solid financial position, Wright said. They will raise potential concerns, share relevant economic data and provide advice on how to adjust.

“There are many times when CEOs or CFOs aren’t focusing on the same things capital providers are focused on,” Wright said. “It’s about helping them strategically and intentionally position their company so they are able to access the capital they need to succeed in all times.”

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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