Strong Demand Remains for Business Borrowing

YOUNGSTOWN, Ohio – Even with rising interest rates, lenders that connect business borrowers with financing options report customers continue to borrow to fund expansions, improve efficiency and meet other needs.  


The Business Journal interviewed lenders at Farmers National Bank, Huntington National Bank, Mercer County State Bank, PNC Bank and Premier Bank as well as Valley Partners and Penn-Northwest Development Corp. What follows are their insights and perspectives.

When lenders with PNC Bank talk to their customers, the discussions go beyond lending and deposit activity into more of an advisory relationship. “It’s a conversation around their business, getting to know their business much better, providing ideas and solutions well beyond just the borrowings and deposits,” PNC Youngstown Regional President Ted Schmidt says.

During the pandemic, PNC Bank saw a drop in use of capital lines as companies built their liquidity, Schmidt says. Now customers are “trying to capture the momentum [of building their businesses],” he adds.

“We have definitely seen an increase in lending activity despite the rising rate environment,” Schmidt says.

Rates were at “such historic lows for so many years” that although “meaningful increases” have occurred, companies still determine that projects are viable investments and the cost of borrowing is “within the line,” as Schmidt puts it, for their return on investment.  

Many businesses are taking advantage of the fixed-rate environment going out five to seven years “because that’s still attractive versus the short-term spike in short-term interest rates,” he says.


Sam Huston, Mahoning Valley community president for Huntington National Bank, says he is “definitely seeing an uptick in the [mergers and acquisitions] activity,”   


Many still have cash reserves and are looking to deploy them, in some cases in search of efficiencies, Huston says.

“The workforce and supply chain issues are still very real to a lot of companies,” he notes.

In some cases, acquiring another company can result in the efficiencies and the additional workforce they seek. Some acquisition opportunities are created by companies that planned to sell before the pandemic but postponed those plans, the lenders say. 

With bank rates relatively low for the longest time, there was little incentive for companies to use the subsidized lending programs that the Mercer County Industrial Fund offers or the Shenango Valley
enterprise funds, according to the executive director of Penn-Northwest Development Corp., Rod


“Now that rates have started to increase rather rapidly, we’re starting to see more activity in these programs because our rates are basically a couple points below,” Wilt says.

Businesses have worked though Paycheck Protection Program or other pandemic relief funds so again are looking for capital as they pursue growth opportunities, he adds.

Through the past eight months, commercial lending has been “fairly robust,” says Andrew Estock, market president-East with Farmers National Bank in Canfield. Demand for commercial real estate and commercial and industrial loan segments has been active.  


Like Estock, Josh Toot, Mahoning Valley Market president for Premier Bank, reports “robust” activity in commercial lending here following back-to-back banner years.

“We see a lot of expansion. We’re seeing a lot more acquisitions, equipment purchases, and the need for increased working capital lines,” Toot says, “Across the board, we’re extremely busy.”

Premier Bank recorded the biggest quarter in the history of the bank during the second quarter, says its president and CEO, Gary Small. Although companies remain cautious, there is business to be done. 


“We were certainly in the top 10% of the country relative to growth that we were seeing. And that was coming on the back of three really strong quarters between the second half of ’21 and the first quarter of ’22,” Small says.

Commercial lending was up 15% during one recent quarter, driven by pent-up activity from the past two years.

“It’s across the board,” Toot says. “We are everywhere – health care, insurance, manufacturing, real estate acquisition, hospitality, food prep. You name it.”



In some industries, such as trucking, businesses looking to expand are encountering supply chain issues, Small says.

At the same time, says Huntington’s Huston, “We are seeing an awful lot of good things happening in manufacturing,” which he describes as probably the top sector of activity.

Other active sectors include transportation/distribution and medical, he says.

Huston describes the Youngstown market as “heavily concentrated” in manufacturing and distribution.

Both industries “are very active right now and have pipelines that go six to 12 months out,” says PNC’s Schmidt. There is what he calls “a lot of cautious optimism” beyond that point. But if supply chain issues “lighten up a little bit,” that will help companies meet their obligations to their customers.   

Business expansions represented much of the activity that Mercer County State Bank is financing, says Scott Patton, its CEO in Hermitage, Pa. Much of it was real estate investment by customers who were looking to increase their portfolios and came across good opportunities. 

“It just seemed like a lot of pent-up demand,” Patton says, with activity taking place across sectors.

Manufacturers are coming to Penn-Northwest for financing, Wilt says. “What our loan programs have been built around is the manufacturing sector because it’s built around job creation,” he says.


By contrast, says Teresa Miller, executive director of Valley Partners, “We have not seen a high concentration in any one industry.” Businesses seeking financing include an insurance company, a winery and a graphic design shop, she notes.

Among the factors driving borrowers in the market are  opportunities related to Foxconn and Ultium Cells in Lordstown and even the $20 billion Intel project near Columbus.

Intel will provide downstream opportunities for local companies, Huntington’s Huston says: “That’s going to continue to drive some of the lending opportunities that are going to come to us in the coming years.”


Little of the lending has been for startups, the lenders say.

“We don’t see a lot of true startup businesses these days,” Premier’s Toot says.

While existing businesses might do a spinoff to establish another stream of revenue, doing “a true startup from the ground up” is not easy, he says. Even loans though the U.S. Small Business Administration’s 7(a) program are used mostly for expansions and acquisitions.

Farmers’ Estock agrees. “I see more expansions than startup activity,” he says.

“Startups really tend to percolate when the economy slows down,” adds Penn Northwest’s Wilt.

“You’ll see more people kind of go it alone as the companies or businesses that they were with begin to consolidate or merge or shut down,” he says.

Right now there is “more work than there are workers, so that’s really not a great environment for people starting up when they can really go to the job of their choice in many cases,” according to Wilt.

“There was a period of time where we used to hear people locally say there’s a lack of skilled labor,” says Premier’s Toot. “Now it’s gotten to the point where it’s just a lack of labor, where there’s just not enough bodies to put into positions.”

At Valley Partners, customers are using financing for both business startups and expansions, Miller says. “We see a higher demand for startups since part of our mission is to lend to those that are unable to get traditional financing,” she explains.


Lenders say many of their customers are investing in artificial intelligence or point-of-sale technologies to help them improve efficiencies and cope with the tight labor market.

“That is something that I think a lot of small business owners are still learning about and trying to figure out how that can fit in their particular organization,” Huntington’s Huston says. “Quite honestly, even in the banking industry, we’re all still learning about how some of that fits into the business world.”  

The pandemic accelerated the trend of manufacturing moving into AI, Toot affirms.

Mercer County Bank’s Patton reports businesses making investments in AI had started begun before the pandemic.

“They just had some more opportunities in the last two years to kind of accelerate their plans. But for the most part, that wouldn’t have been a big focus for our customers,” he says. “We’re really in that small-business space where two to 10 employees is normal.”

Technology has been a focus as a consequence of workforce issues, Estock says. “The labor market does have businesses looking at technology to bring efficiency and increase productivity with fewer employees,” he says. 

Many customers that are experiencing labor shortages are buying equipment to offset that, freeing their existing workforce to do other tasks and having a “positive impact on their bottom line,” PNC’s Schmidt says. “They’re not displacing employees because they’re so difficult to find. What they’re able to do is produce more with less in terms of their equipment than just reallocate their employee.”

Huntington’s Huston also reports customers are “looking to automate and upgrade equipment” in response to workforce challenges. “We’re seeing a lot of that – where they’re putting in lines that maybe aren’t as labor heavy,” he says. 


The rising interest rate environment “has not started to really rear its [head] as part of the pipeline activity,” Huston says. Many of the projects Huntington is financing “go back months,” as he describes it, so business owners remain committed to moving forward with their projects.

“Interest rates were so low for so long that I think people just became accustomed to that 2% or 3%. But rates are still very competitive,” Toot says. There remains a “huge demand for capital,” he says, with borrower interest even picking up in the last month or so.  

For Valley Partners, there is a distinct benefit, according to Miller.

“The rising interest rate environment has increased the need for our type of gap financing,” she says.

While other lenders need to keep their rates at federal levels, Valley Partners has more flexibility and doesn’t need to increase rates as quickly as others, she says.

Requests for working capital have slowed as businesses have leveled out and settled, she reports. “It feels like we are close to being back to a pre-pandemic lending environment,” Miller says. 

“We’re starting to see things slow down a little bit,” Patton says. The past 18 months have represented some of Mercer State Bank’s most productive times in business lending but the phone isn’t ringing as often now. Customers are “unsure what their next move is going to be,” he says.

“They’re waiting to see what’s going to happen with the economy, what’s going to happen with interest rates,” he says. “A lot of them are concerned about what’s going to happen with the midterm elections and how that’s going to play out.” 

Rising interest rates aren’t having a “big impact yet,” Farmer’s Estock says but his bank sees it coming, “as the economy digests higher rates and higher cost of debt.”

“To date, the economy has absorbed higher prices with the high amount of liquidity in the market,” Estock says “We are beginning to see softening in residential loan products and we will expect the same in business lending as higher rates weigh on business operations.”

With the uncertainty coming in the next two to three quarters, there might be a “healthy pause” as businesses might delay their plans to ensure they “have a better view” of what is ahead, Premier’s Small says.

“It remains uncertain as to how the recent rate hikes will impact demand in the last quarter of 2022,” Estock says.