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Economic Trends for Lenders: 2021 and Beyond

Key Economic Trends for Lenders for 2021 and beyond include accelerated growth, increased competition, and digitalization. 2021 represented a return to normalcy for many. After the dust of 2020 settled, markets became more predictable. The economy started to recover from the effects of lockdowns and quarantines. The financial sector has continued to rebound and things look promising.

According to the US Department of Commerce, the GDP has grown by 6.4% this quarter. The Dow Jones has gone up and it looks as if it will continue to rise. The financial sector is especially strong and has contributed 56% to the GDP just in the first quarter. Thanks to the stimulus packages and the American Rescue Plan Act of 2021, the economy is in recovery and is now stronger than ever.

The economic trends point towards continued growth in the US economy and a promising future for businesses both large and small. According to Deloitte Insights, the Real GDP is expected to increase by 5.7%-7.7% in 2021 which is impressive. Investment and business spending is projected to be on the rise. Business investment is predicted to increase by 6.6%. Investments such as software, ecommerce, transportation, intellectual property and real estate are estimated to be on the rise in 2021 while investment in retail space and office buildings is estimated to be on the decline. Growth in most sectors of the US economy is increasing. Overall growth is expected to go up by as much as 10% in the second quarter.

Growth of Lending

In order to encourage businesses and individuals to invest, the Federal Reserve has been trying to keep long term interest rates low. Thus, making it cheaper and more affordable than ever to borrow money, lend to clients, take out loans, and seek alternative financing. This seems to be working as commercial lenders have been experiencing an uptick in new clients seeking out funding. Financial institutions have been benefiting from this steady stream of new clients in need of capital. Business is looking good for financial institutions as this economic trend will likely continue as 2021 wears on.

Rise of Small Business Investment

2021 is also seeing a rise in investment and small businesses. Thanks to the SBA loans and stimulus checks of 2020 and the now growing economy, more and more people are starting small businesses and taking out loans to do so. Those who were laid off from old jobs are now entering a new chapter as small business owners. These new entrepreneurs of 2021 are turning towards both traditional and nontraditional lenders to fund their startup costs. Meanwhile, more seasoned small business owners are taking the time to invest in their businesses, pay off debts, and fund new growth. Commercial lenders have much to gain from this.

Increase in Digitalization

Before the pandemic started, the financial sector was already headed towards increasing digitalization. Covid-19 caused those trends to accelerate as lockdowns drove people towards Zoom and other applications in order to conduct business from home. The physical office was replaced by the home computer. Even after the quarantines and lockdowns were over, the adoption of new technology innovations continued to shake up the workplace. More and more businesses are going digital and will likely continue to do so. Technology innovations are continuing to play an increasingly important role in the financial sector. Businesses applying for financing have come to expect the convenience and speed of a fully digital experience. From the rise of the digital office to automated loan origination technology and cloud-based lending, businesses are adopting new technology in order to help themselves stay competitive and adapt to the changing times. Do you have the tools to be ready to meet the increased demand for financing? Are your current manual methods slowing you down? Decipher provides an all-digital experience for small businesses in need of capital and for lenders to keep up with demand and crush their competition. View Decipher’s digital lending tools today.

Bureau of Economic Analysis
U.S. Federal Reserve Recent Trends
U.S. Federal Reserve Monetary Policy
Deloitte Insights – U.S. Economic Forecast