FED Raising Interest Rates: How This Affects Small Businesses

Posted By Kalamata Capital LLC || 25-May-2017

In March 2017, the Federal Reserve raised the key interest rate from 0.75% to 1.0%, the second rate increase within a three month time period. FED officials anticipate two more increases in the interest rate before the end of 2017, with the goal of increasing the rate to 3.0% by the end of 2019.

Even though increasing interest rates represent a growing US Economy, what does this mean for small businesses?

Higher key interest rates will trigger banks to charge higher interest rates for commercial and real estate lending. Here a few steps business owners can take to prepare for increasing costs of financing.

Evaluate Current Debt

How is the business’s current debt structured? Can the bank increase variable interest rates?

You may be eligible to refinance or restructure the business’s current debt before interest rates increase again.

Revaluate your Business Plan

What is on the horizon? Does the business plan to purchase equipment, automobiles, or real estate?

It may be worthwhile to examine expediting plans for large purchases which require financing, to minimize the repayment cost of the purchase.

Apply for SBA or Working Capital Financing

Is the business looking to take on long term financing? Is the business considering applying for working capital?

It could be beneficial to accelerate the search for financing options to lock in low fixed interest rates.

Conclusion

With rising interest rates throughout the United States, now may be the most important time to evaluate your company’s long-term business plan. Procrastination could lead to paying more interest in as little as 6 months down the road.

Call Kalamata Capital at 884-551-7511 to speak with a financing specialist today.
Categories: Small Business, Tips, SBA