Strong Economy Can be Challenging for Small Businesses

As we enter the new year, the US economy is strong and expected to continue growing. Unemployment is the lowest it’s been in over 10 years. Household spending has increased and fixed business investment continues to grow. That’s definitely good news, but as a result of all of this positive growth, interest levels are rising. While rising interest rates are good for the economy overall, it poses some challenges for small businesses, especially those that need to borrow money.

The Bad News

  • Higher cost of capital – when interest rates rise, so does the cost of capital. This means it will be more expensive for small businesses to get loans.
  • Higher interest rate charges on credit cards – business credit cards that maintain a balance will get hit with high interest rates.
  • Interest rates are projected to increase for the next two years – higher rates could eat into the small business cash flow.

The Good News

  • Strong economy equals increased spending – small businesses should feel optimistic about the current economic environment, as the job market is solid and consumer spending is strong.
  • Strong economy equals businesses growth – as consumers increase their spending, the revenue enables businesses to get stronger and expand.
  • Easier access to capital – with interest rates increasing, small business owners should have easier access to capital because banks tend to take on smaller loans when the economy is strong, as it is more profitable for them to lend. This creates a greater demand for credit, which fuels interest rates. As such, more institutions will be lending, allowing small businesses to get the capital they need to expand, just at a higher price.

What Does This Mean?

While a strong economy is good for business, it means higher borrowing rates. For business owners who are planning to borrow money, financing and timing are key in this solid economic environment. Funding needs to be obtained quickly before the interest rates rise again. And as time goes on, loans will become even more costly.

What Can Small Businesses Do?

  • Refinance variable-rate business loan with a fixed-rate product in order to lock in a good rate.
  • Negotiate the interest rate with your lender to try to get a better rate.
  • Partner with ExpoCredit as an alternate source of financing. ExpoCredit is experienced at helping small businesses get the capital they need, which helps keep them running and growing.

How Can ExpoCredit Help?

ExpoCredit specializes in providing flexible, custom short-term working capital solutions to businesses through a portfolio of financial products and services. We serve the needs of both domestic and international companies who need immediate cash flow. Partnering with ExpoCredit will help maximize your business growth in this current economic environment. We make it easy and efficient with effortless execution.

Excellence * Execution * Experience * Expertise * Flexibility

Let ExpoCredit be your Financial Expert!
Contact us at [email protected] or +1 (305) 347-9222 to learn more

Forbes.com/With Interest Rates Rising, Small Businesses Should Apply for Loans Now
Fundera.com/Rising Interest Rates Could Make Business Loans Expensive, but Here’s the Good News