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Survey: Treasurers Are Changing Operations to Obtain Financing

  • By Andrew Deichler
  • Published: 4/10/2019

Washington, D.C. -- New research from the U.S. Chamber of Commerce revealed that although financing is generally available, many corporate treasurers have been forced to change how they operate to obtain it.

Last week during a conference at the Chamber’s headquarters, Sparky Zivin, partner with Brunswick, provided some analysis of a new survey by the Chamber’s Center for Capital Markets Competitiveness on corporate treasurers’ views about the state of financing. Fifty-eight percent of the 300-plus treasurers polled reported that their ability to manage cash operations has improved. Additionally, 45 percent said that their access to short-term credit has expanded, while another 31 percent reported no change.

However, while banks offer a wide range of services available to corporates, about a third of corporate treasurers polled believe access to these services has become more difficult. In particular, this has been observed in mid-sized companies,” Zivin said. “About 36 percent of mid-sized companies say it’s actually now more difficult to get access to the full range of services.”

Corporate treasurers cited bank regulations as the major impediment to their ability to access capital. To address these challenges, many companies are taking unexpected actions to manage cash operations. Again, it’s been the mid-sized companies doing the most to manage difficulties they’ve experienced in their banking relationships.

Solving the Challenges

In terms of actually solving these challenges, treasurers see roles for all of the players in the system; including the government, banks and themselves. For regulators, two-thirds say they would support recalibrating capital requirements, particularly when it comes to lending to small businesses. From their banking partners, treasurers are looking for a wider range of offerings, modern technology and long-term relationships that they can count on. They are making these demands because of the changes they’ve had to make to their businesses.

How have they had to change? Fully 45 percent are absorbing more costs to do business. And 28 percent said they’ve passed costs onto their customers. “So not only are we seeing these impacts affecting the banking industry; we’re seeing the banking customers being affected, and that is trickling out to the entire economy,” Zivin said.

Lastly, 27 percent of practitioners are reducing the number of banks they work with. Since they no longer have the luxury of working with a large number of providers, they are looking for long-term relationships from their banks and are asking more from them.

In a follow-up panel discussion, Tom Hunt, CTP, AFP’s director of treasury services, noted that survey revealed how much corporate practitioners are called upon to safeguard the organization as a whole, even if it means taking unexpected actions. “Treasurers in the U.S. are really the risk managers of the corporation,” he said. “They’re protecting Main Street and looking for growth opportunities and finding those within the organization.”

Perhaps then that is why treasurers surveyed were overall more positive about their own outlook than the outlook for the global economy. The majority (62 percent) expect their own financial performance to improve over the next 12 months, even as more than a third of them expect the economy to worsen, primarily due to interest rates and trade-related issues. “They’re much more optimistic about their company, more so than the global environment, or the environment they operate in,” Hunt said.

Neal Blinde, treasurer for Wells Fargo & Company, didn’t find the data in the survey particularly surprising, as the data is consistent with what is typically seen in the later stage of an economic cycle after a sustained period of stability. “What we’re observing in the banking space is that the access to credit is quite good, and that’s both directly from banking institutions and from the capital markets,” he said. “Generally when I speak to my peers—we all want to do more lending in this environment. The cost is quite good, and it’s a good time to be active. But I think the other side of that equation is, when we look at that downward trajectory on the economic outlook, there is some caution on the part of our customers entering into new financing.”

Hunt agreed that some of the apprehension may stem from treasurers looking at the bigger picture. “I think it’s looking at more of the global aspects and the uncertainty—things like Brexit, Venezuela and not really knowing what the business prospects are going to be,” he said. “Treasurers retrench to safety, and safety is liquidity. Liquidity is balance sheet management. So it’s a common theme we continue to see.”

Perhaps the most surprising revelation in the survey is the disparity between treasurers’ outlook for their own organizations and their projections for the overall economy. Michael Lenz, corporate vice president and treasurer for FedEx, believes that recent events have led businesses to build in flexibility and contingency planning to address a variety of economic circumstances. “Certainly, 10 years ago, our company had to make some significant adjustments and adapt to the economic downturn,” he said. “As we’ve grown out of that in the last 10 years, we certainly have that in the backdrop of various strategies and executions so that we’re positioning ourselves to be successful under a range of potential economic scenarios.”

The treasury management track at AFP 2019 will have multiple sessions on how corporate treasurers have to manage cash operations. Download the brochure.

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