Small businesses finding the 'hurdle rate is higher' in credit environment: TriNet CEO

TriNet CEO & President Burton Goldfield joins Yahoo Finance Live to discuss the Fed raising interest rates, the banking crisis, how credit tightening could impact small businesses, and tips on how business owners can be resilient in today's economic climate.

Video Transcript

AKIKO FUJITA: Well, the market is digesting the Fed's 10th consecutive rate hike. Fed Chair Jerome Powell warning of headwinds from tighter credit conditions, especially in the face of the banking crisis. But overall, Powell did not appear too concerned, saying the system is, quote, "sound and resilient."

Investors don't seem to agree with Powell. Shares of PacWest plummeting today in the session, down 50% after the bank confirmed it is, in fact, exploring sales of strategic assets. Western Alliance shares also sinking. Trading was halted earlier today.

For more on the crisis and how it will impact small businesses, we're joined by Burton Goldfield, TriNet CEO and President. It's good to talk to you today. I guess there is a debate, first of all, whether, in fact, we are in the middle of some sort of banking crisis. But when you think about the higher rate environment, what has that meant for you as a small business owner?

BURTON GOLDFIELD: So for me, which represent over 22,000 small businesses in America, the hurdle rate is higher. But great businesses are being funded and we are seeing a record level of innovation and success with many of the small businesses we serve.

SEANA SMITH: Burton, but given the fact that we will likely see, if not we have already started to see tighter lending conditions, to what extent do you think that's going to hold back growth in the sector?

BURTON GOLDFIELD: So overall, what I am seeing is a fairly bifurcated environment. I'm seeing biotech companies that are successful getting additional funding. I am seeing software companies getting additional funding. But at the end of the day, you need a business plan, you need resiliency, and you need to show success in the short term.

AKIKO FUJITA: What do you mean when you say the hurdle is higher?

BURTON GOLDFIELD: Meaning that the path to profitability, the time to profitability, the ability to generate real revenues is shorter because the cost of capital is higher. There's no question about that.

SEANA SMITH: Burton, do you think we could potentially see more bankruptcies? I mean, it'd likely to be that we would see more bankruptcies within small business because of the challenging environment.

BURTON GOLDFIELD: Certainly, that's a possibility. I don't predict the future. But in the 22,000 businesses that we're serving and we have served for almost 30 years, we are not seeing a spike in bankruptcies like we did in the 2008 and 2009 years. .

AKIKO FUJITA: How do you think this changes the way that small businesses operate now? I mean, there's certainly a lot of risks that have popped up over the last several months that maybe a lot of small businesses didn't really foresee. What are you hearing about how they're going about shifting things up?

BURTON GOLDFIELD: So resiliency is the key. And your point is correct that changes are coming fast and furious with the banking issues. COVID, PPP loans-- all of the things that small businesses face, including remote work situations.

Resiliency takes its form in people, processes, and systems. And the companies that have people who are resilient and focused on results, processes that can handle change quickly, and systems that can support those changes are succeeding. I am very optimistic about what the next 6 to 12 months has for the small and medium business market in the US. And I believe over the longer term, nobody I know believes that technology, professional services, biotech won't grow and prosper in America over the next few years.

SEANA SMITH: Well, Burton, given that growth that you're expecting to see among small businesses, what about the labor force? Certainly, labor shortages has been something that a number of business owners have been having a tough time dealing with. Are they able, the business owners that you've been speaking with, are they able to find the workers that they need and attract the top talent? And how so?

BURTON GOLDFIELD: So they need to attract the top talent by having the right culture, by having the right mission. But, frankly speaking, the larger companies have laid off great people. And I am seeing the small, medium businesses snap up the people they've coveted for the last two years.

SEANA SMITH: All right, Burton Goldfield, we'll leave it there. Thanks so much for joining us-- CEO and President of TriNet.