In lush, green British Columbia, the trees, mountains and clouds sometimes dominate the view. It’s easy to overlook the province’s buzzing manufacturing hub, fueled by natural resources and entrepreneurs eager to seize opportunities just over the border, or an ocean away.
Fortunately, Scotiabank’s Commercial Banking team is deeply rooted in the province, helping growth-minded manufacturers, wholesalers and distributors expand amid towering challenges, from pricey real estate and labour shortages, to the many unknowns of foreign trade.
Diverse growth in the forest
While B.C.’s forestry sector looms large - including wood products and paper production - the manufacturing sector is diverse, observes Scotiabank’s Mike Spiess, Director and Group Lead, Commercial Banking.
“People are surprised by the range of industry we have here, from windows to widgets, to food processing and apparel. It’s exciting to tell people that ‘Yes, we make that here.’”
Equally intriguing is local industry’s appetite for expansion, whether to satisfy the frantic pace of construction projects in the region, and the demand for finished building materials, or to pursue promising exports and imports in the nearby U.S, or across the Pacific.
But gut-wrenching challenges accompany these opportunities, including current supply chain disruptions following the pandemic, which have created shipping backlogs, materials shortages and rising input and transport costs for many.
“While COVID-19 has increased the risks, most of our clients are doing very well, with stronger cash balances and sales orders than pre-pandemic,” says Mike Dunnigan, Director and Head of National Accounts. “The bigger issues they face relate to expansion, especially the need to incorporate technology to help address their labour challenges.”
Dunnigan explains that, even before the pandemic, B.C. manufacturers faced serious labour shortages, affecting both their local and stateside operations, crimping their ability to satisfy product demand. “It’s extremely hard to find the necessary labour, so manufacturers are turning to sophisticated equipment and robotics to help solve that.”
“Space is the other ‘top of mind’ challenge for entrepreneurs,” notes Andrew Holton, Director and Group Lead to mid-market clients at Scotiabank’s Langley office. “Clients tell us ‘I want to grow but I am restricted by the space I have.’ They want to buy the lot next door to expand their factory, but high industrial real estate prices are making businesses rethink their current location or in some instances even consider an additional facility cross border.”
Structuring solutions for tall challenges
Scotiabank’s Commercial Banking team helps B.C. companies overcome these sky-high barriers to growth. Describes Dunnigan,
“It’s our job to help solve their challenges and create the right structures that may be outside of the traditional lending box, perhaps by leveraging other assets to access capital, adding a layer of patient debt from our partners at Roynat Capital, in addition to providing solutions to manage interest rate, currency, commodity and other potential risks. Every company is different, so no two solutions are alike.”
Holton explains how the Bank helps clients acquire technology to modernize their facilities and ramp up production: “When they are buying a longer-term asset that will amortize over its lifespan, they need a borrowing structure that won’t impact their day-to-day working capital. We discuss their capital expenditure plans over the longer term to set up packages that give them the flexibility to acquire equipment, but segregated from their operating lines, for room to breath.”
Such solutions must often be devised quickly. For instance, if, amidst today’s supply chain slowdowns, a client finds new machinery to expand their production, they must arrange payment quickly. Or, as Holton recalls, the case of a company that had outgrown its current location and suddenly had the chance to buy the adjoining property. Holton’s team rallied to help the client re-leverage their existing property at favourable terms and buy the neighbouring site to double their production space.
Speed and flexibility are also essential when serving B.C.’s many exporters and importers who need trade finance solutions to facilitate cross-border trade and mitigate the risks. Spiess recollects a B.C.-based company that imported materials from Asia, for assembly in Canada and sale to customers in the U.S. His team devised a financial package that could recognize normally hard-to-value foreign inventory and receivables, appreciate the seasonal ups and downs of the business ,and secure debt financing for expansion with the Export Development Bank of Canada . It’s all in a day’s work for Scotiabank Commercial Bank a Trade Finance professionals who help companies seize opportunities and minimize unfamiliar import/export risks.
Simple solutions to ongoing challenges
Spiess observes that solutions to nagging problems are often ‘hidden in plain sight’ for busy companies racing to keep up with growth. In particular, companies that are new to foreign trade may overlook their foreign exchange ‘FX’ needs. “Many companies grow so quickly that they don’t realize they now have the volumes to start hedging their FX to better manage rate changes. We bring in our Scotiabank Foreign Exchange partners to help them lock in prices and control their costs,” says Spiess. He adds that it’s important to seek out solid, well-established FX providers that can deliver dependable currency services in volatile markets.
Dunnigan notes that clients can reap impressive cost-savings - and de-risk their business - by taking advantage of ‘modern’ banking services, including electronic payments and cash management tools: “Often, clients are so busy with the day-to-day tasks, like sending ‘John or Sally’ to the bank with the cheques. We connect them with our Payments and Cash Management partners to show them the advantages of going digital.”
It comes down to good people who understand each company, including their industry nuances, and translate solutions to a client’s needs. “That’s true in forestry, where you must understand what makes an operator tick, including everything from regulations to lumber prices,” says Dunnigan. He recalls one forestry company that switched to Scotiabank when everyone from loggers to truckers raved about the Bank’s commitment to the forestry sector. The Bank later helped them acquire new mills, to diversify their supply chains, and stood by them when wood products demand plummeted, and U.S. customs duties rose. “We are not a bank that moves in and out of certain industries or markets when hard times happen,” points out Dunnigan.
Andrew Horton agrees, noting how Scotiabank continues to invest in the B.C. market, by adding more specialized team-members and tech-enabled services, to serve the province’s bustling industrial base:
“This is a really robust economy for our manufacturers, in light of the geography, resources and local entrepreneurial drive. We understand our clients, and we’re consistently here, helping them reach this growth and overcome the challenges of a very dynamic landscape.”