Changing Times and the Coronavirus Pandemic

The recent COVID-19 pandemic has had a significant worldwide impact on everyone: from individuals, to small businesses, to entire industries, to national governments, and even to international organizations; no one is immune to the effects of this virus. Around the world, everyone is taking precautions to stay safe and preparing for the unknown ultimate impact the virus will have on their lives.

This pandemic is a rare, historical occurrence; our world is changing.

Changes in the Lending Landscape

While industry sweeping trends tend to be more gradual and driven by innovation or customer demands, it is already evident that the COVID-19 pandemic will shape the future of the worldwide business landscape. While everyone is hoping for a return to normal, it is instead likely that a “new normal” will emerge when the pandemic is over. Businesses that effectively predict and adapt to the new normal are the ones that will succeed in the end.

Right now, however, the lending landscape is also rapidly changing, as certain businesses slow or are forced to close, their revenues significantly slow or stop. And with no revenue, these businesses become unable to qualify for loans.

The quarantine and restrictions caused by the COVID-19 virus have caused two key “instant trends” affecting businesses:

  1. People are staying indoors and away from others.
  2. Discretionary spending has decreased.

As a result, the following industries are seeing considerable decreases in revenue:

  • Hospitality/Travel: People socially distancing themselves choose (or are obligated) to avoid leaving the house, let alone flying in a cramped jet with hundreds of strangers. Cancelation of events led to considerable losses for hotels during their usual busy season; restaurants are seeing considerably less traffic than normal (or have closed). Travel agencies especially are struggling; their client base is the aging, at-risk population.
  • Discretionary retail: An economic downturn leads to lower disposable income, and therefore decreases in discretionary retail spend. Social distancing measures also keep people from going to retail stores.
  • Entertainment: Bars, movie theaters, bowling alleys, gyms, and other “fun” facilities are currently unable to operate. Economic downturn leads to lower entertainment budgets.
  • Personal services: Social distancing is the primary factor affecting barbershops, hair salons, massage parlors, and other personal services.
  • Dentistry: Dentistry, despite being a medical practice, is currently experiencing downturns as well. Dental offices are considerably reducing their hours of operation due to the protective measures in place.
  • These industries are all being severely impacted by the COVID-19 situation and are therefore facing widespread lending restrictions. Beyond that, some lenders are taking more extreme measures – completely shuttering their doors and ceasing lending altogether. These closings further exacerbate the issue. Firstly, there is a major loss of goodwill – people feel betrayed by lenders going into hiding instead of helping their customers through a difficult time.

    Secondly, fewer lenders operating means that borrowing is made more difficult all around. Even potential borrowers that have received online approvals but continued shopping around may have suddenly had the rug pulled from under them, leaving them cashless and without any better options available. Lenders still operating may have also raised rates due to the decreased supply, further restricting access to funds.

    Cardiff is not shutting down or raising rates across the board. Instead, we are implementing some changes to the application process– all applicants will have to provide additional documentation.

    Changes in Policy

    Because of the short-term nature of our product, and the uncertainty of the near future, Cardiff, as well as all of our partners, will now require Month-to-Date bank statements effective immediately.

    More than ever, having a plan is key. How are you going to manage your business going forward? What is the money for? How are you adapting to the changing landscape? What are your revenue sources? We are looking for competent business owners that want to make the most out of an unfortunate situation. Our analysis team has identified industries that have a unique opportunity to thrive in the changing climate.

    New Opportunities

    Much like the “instant trends” have negatively affected a variety of businesses, these changes have also created a unique opportunities for others. People in the following industries should consider what they can do to grow their business and meet ever increasing demand.

  • Grocery/convenience stores: Grocery, big box, and convenience stores are all seeing record numbers in same store sales growth. This could be just the time to take out additional funding to buy more inventory, modernize infrastructure, or otherwise grow the business. Businesses further up the supply chain also benefit from this sales growth.
  • Agriculture: “Grocery stores are booming, so farmers are going to experience a lot of demand growth as well. There is a lot of opportunity to grow a business.” This summary from our credit analyst, Julian, eloquently provides an example of an industry which can take advantage of the current situation.
  • Pharmacies/medical services: Medical services are facing unprecedented levels of demand – largely because of the pandemic. It may be necessary to invest, and fast, in order to adequately treat the population.
  • Home repair: “Home repair services are due for a boom. So many people are staying and working from home, using their facilities more often. Everything will wear out faster, thus requiring more maintenance and repair” – further analysis from Julian. Growth in home maintenance is a natural consequence of more time spent in homes.
  • Home security: People are nervous right now. The future is uncertain, and many are looking to take whatever measures necessary to protect their loved ones. Especially as people spend more time at home, they will want to make sure it is as safe as possible. Expect growth in the security system installation and improvement industry.
  • Delivery services: A natural consequence of people staying at home is an upswing in delivery requirements. Amazon is significantly short-staffed, and due to the massive volume of orders is forced to prioritize stocking and delivering essential supplies only. Wal-Mart, Costco, and other large volume sellers are also seeing massive spikes in delivery orders. Local couriers are experiencing the consequences of this growth and are thus presented with an opportunity to expand their businesses.
  • On Equipment

    Equipment leases and purchases are in a particularly unusual situation right now. Businesses are closing, so there is less demand for equipment. Lenders are hesitant to fund large purchases (and the restricted industries list continues to apply), making it more difficult to secure financing. Conversely, it may be a good buying opportunity for the most confident of business operators – as wholesalers may be lowering their prices in response to the lack of demand, as well as any internal issues they may be facing.

    A Hopeful Time

    Eventually, this too shall pass. It is important to adapt, to grow, and to change. You are not alone – no one has been left untouched by the COVID-19 pandemic. It won’t be immediate, but life will return to normal, and ultimately, everyone will move on. Together, we can get through this.