When interest rates are rising and headlines about war and unrest dominate the news, it’s easy to panic about finances, but panic is the last thing you should do when you run a business.
What you need now is a cool and collected approach. If you aren’t sure what your next steps should be, it’s time to speak with a professional, preferably someone who has knowledge of the history of your business and an understanding of your future goals.
To help you, we are providing a short list of questions you can ask yourself and your commercial funding partner.
1. Should we take out a loan before the Fed raises interest rates?
Before you can logically answer this, you need to determine what your expenses will be for the coming year or two, whether you can handle them with the money you currently have at hand, and whether you have any growth plans that might cause you to incur a significant dollar commitment.
Generally speaking, why borrow money if you don’t need it, right? But — and this is important— if the Fed raises rates by two percent or more, commercial financing rates could skyrocket. With that in mind, it may make sense to secure a loan and sit on it, just in case.
2. What should we do about the variable-rate loans we hold?
Variable-rate loans are great when interest rates are low, as they can hover near zero-percent interest. But they can jump quickly when market rates change, so now is the time to talk to your commercial loan lender about options going forward. This may very well be the time to lock in a rate.
3. What other funding options are available to me?
This is a question that is best discussed with your commercial lending partner, simply because there are plenty of options, and who would be better versed in their pros and cons than the people who work with the loans every day. Make sure these options are on your checklist when you get ready to meet your expert: merchant cash advances, equipment financing and SBA loans.
You might also consider, if your business is in a position to do so, raising capital by selling equity. What you give up in ownership you gain back by not having to pay interest on the capital you raised.
4. What should we expect in the coming months?
This is a tricky question to answer, but we can tell you this: talk to someone who’s been through the ups and downs of interest rate hikes. If your business is relatively new, congratulations! Your interest rates have likely been low. But with the very real prospect of that changing, you need to speak with someone who is well versed in the industry, understands its history, and can offer suggestions and perspectives that are borne of experience.
The experts at Commercial Funding Partners have decades of lending experience. Let us be your trusted resource as we navigate 2022 and beyond. (801) 545-4000