Infrastructure Week - Issue 1
Hi there!
I’m excited to share Ned’s first Infrastructure Week, where we cover all things lending tech and transformation.
We often get asked what’s new in small business lending, whether it’s about systems innovation, financial products, or operating practices.
Infrastructure Week will bring operating perspectives together and we’re excited to build this community. Let us know what you think and click here to subscribe!
Looking forward,
Dave Silverstein,
Founder and CEO, Ned
📊 Q1 Lender Econ
Big Picture
Economists have a sunnier disposition regarding 2024’s economic outlook, and at Ned we’re joining the cautiously optimistic chorus.
Tale of Two Cities economics prevails however - it’s the best and worst of times for non-bank or private lenders. A soft or a hard landing has similar outcomes:
- Bank lenders aren’t lending; demand for private capital will remain high; so,
- Non-bank lenders will need to optimize ops or risk losing out on growth
Endings and New Beginnings
In 2023 we tracked a ‘will they or won’t they’ Fed as it managed rate expectations. A Goldman Sachs report noted the worst is over, given forecasted rate cuts:
- Inflation fell from 9% last summer, landing near the Fed's target rate
- Hiring slowed recently but remained mostly strong
- Economic growth ticked up
A dissenting viewpoint from Morgan Stanley, however, says that The Fed and Treasury delayed the recession, rather than prevented one:
- Labor market weakened - job openings fell and unemployment claims rose
- Consumer spending is poised to slow down
- The upcoming US elections will create unquantifiable uncertainty
Borrower Perspective
Secondary elements paint the picture for small business borrowers - banks placing deposits in municipal bonds or Treasurys instead of lending, China’s economy is troubled, and there’s a rise in corporate bankruptcies.
Hard or soft landing, it won’t get easier or cheaper to operate or grow a small business, which relies on healthy global supply chains and local economies.
Lender’s Making Moves
Taken together, the small business lender will likely direct resources toward new capacity to qualify packed application pipelines. Be on the lookout as more lenders:
- Design specialty financial product(s) to serve specific markets and sectors
- Lower underwriting costs by considering different data to qualify customers
- Create new criteria and credit policies driven by economic uncertainties
- Streamline tech point solutions toward end-to-end infrastructure
📖 Weekend Read
- It’s okay to be optimistic about the economy (Vox)
- Why Morgan Stanley thinks the US economy could face a shock (Business Insider)
- Banks, Fintechs Battle Over Customer Data in Open Banking Plan (Bloomberg)
- What 2023 Taught Us About Small Businesses And Funding Main Street (Forbes)
- Banking Crisis Plays Out at America’s Smallest Lenders (WSJ)
- Why corporate bankruptcies were up in 2023 despite the improving economy (NPR)
- China’s economy had a miserable year. 2024 might be even worse (CNN)
- (PODCAST) No, the economy isn’t tanking (Atlantic)
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