To fight inflation, the Federal Reserve raises interest rates. Rising rates are already starting to hindersome businesses. The effectscan probably get strongeras the Federal Reserve goes on raising rates amid the strong economy. How are you going to grow your own business? Where can you find reliable and affordable customer financing for small business? All these issues are further discussed below.
Rising Rates: Customer Financing for Small Business
According to Mark Cussen, a financial expert, the period of the lowest interest rates that has lasted 40-50 years is coming to its end. The bottom lines of some businesses are already being hurt. The Fed made its latest move last month: it raised its benchmark rate by a ¼ of a percentage point. Economists anticipate one more increase in December and at least a couple more in 2019.
Small businesses are also using more of the credit they have on their cards. The figures showa 24.5% increase from 22.8% registered a year earlier. The average interest rate on all credit cards was 14.14% in Q2 of 2018, which was the top level over the past 8 years.
What about those interested in business funding? If you’re working with short loan terms (e.g., a few years), your choice may remain without any impact at all. If you go with an adjustable-rate loan in such situation, but your term is only a few years, your increased revenue is likely to get offset the small-percentage rise in interest rates.
However, to make the right choice, you should take into account the situation of your own business. The most important thing is to find a reliable merchant services provider to work with. With the right processor and business funding provider, you can easily get approved for the lowest cost customer financing for small business.
Growing Rates and Small Businesses
Nalanda Matia, senior director in the econometrics practice of Dun & Bradstreet, notes that the majority of small business owners think rising rates won’t affect their business. What Matia thinks is that these businesses can’t be left unaffected.
Only 2% of small businesses consider interest rates and finding financing their main business problems. The same low level was also registered a year ago, as the National Federation of Independent Business reports. 25% think the quality of labor is the biggest problem they have.
Anyway, rates are probably going to head upward, and the yield on the 10-year Treasury note will approach to its top level in over 7 years. So, what should you, as a small business owner, do to avoid falling into major obstacles?
For this, it’s important to keep your day-to-day cash needs under control.What is more, consider negotiating a lower rate on your lines of credit with your bank. Since rates are rising, you might have some temptation to buy equipment, etc. now before rising rates could make borrowing more expensive: don’t do that.
As you see, even if rates are rising and already changing the bottom line of some businesses, you can still analyze the situation and find the right rate solution for your small business.
Author Bio: Electronic payments expert Blair Thomas is the co-founder of high risk payment processing company eMerchantBroker that offers exceptional merchant services, including customer financing for small business. He’s just as passionate about his business as he is with traveling and spending time with his dog Cooper.