Saturday, July 13, 2024

Rising Interest Rates – What it Means for your Business

The prospect of rising interest rates should be a vital consideration for the future of any business, for their operation and the impact on those they do business with. It’s evident that rising interest rates ultimately mean higher borrowing costs. Focus usually centres on the increased cost of mortgages, yet a rise in interest rates will impact businesses of all sizes.

Given the low rates we have seen for many years and the economic outlook, interest rates will likely rise for some time. The effects on small and medium enterprises and larger corporations, especially those with debts and borrowings, have made it essential to evaluate their current debt facilities to avoid getting caught.

Inflationary pressures continue to impact trading positions for many companies and leave them facing the task of assessing how future rate rises will affect operating costs and plans for moving forward. Businesses often require the services of a high-value lending brokerage to arrange finance packages, and now is undoubtedly a time their services can be invaluable. Brokers are seeing an increasing number of companies seeking to assess their current measures and, where necessary, securing the most competitive finance packages to see them through.

Assess your business strategy now

Even with secure and established debt facilities in place, rising interests are a cause for concern, making re-evaluation of borrowing and commitments a sensible precautionary measure.

Many lenders offer corporate finance, and it may be that your existing borrowing strategies will no longer support your business needs as interest rates rise. If you are looking to restructure or take on existing borrowing, it makes sense to contact an experienced corporate finance broker to get an insight into the options available. Especially important when you have high borrowing or know that you have important events such as new contracts, new employees or premises to fund going forward.

Contact a broker

Lenders respond to hard facts presented in set ways. They often respond unfavourably when approached directly with a ‘we want a better deal. Experience tells us it’s usually not the best course of action for companies to directly approach their existing lender and tell them they need a more competitive deal or are looking elsewhere.

A better way to proceed is to work with a broker to source alternative offers in the first instance. Once a better option is available, your broker can approach your existing lender so that they are better incentivised to match or beat the new offer. Renegotiating terms requires an approach that often avoids the need to move, but it certainly does not harm to get your experienced broker to try. After all, they will have already lined up an alternative should your existing lender remain firm.

Don’t delay

New lenders will still need to assess your business lending viability and underwrite your loan, which can take both time and complex negotiations, so it’s essential to move before rates increase beyond those your business can withstand.

There are still some good finance packages, and lenders are looking to provide competitive loans to businesses showing a solid financial position. The approach can make all the difference. An expert in high-value lending brokerage can showcase your business strengths and present the opportunities borrowing affords your business to get the best corporate finance packages.

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