Business Guidance / Featured

Rising Interest Rates – Tips for Business Owners to Prepare

With inflation still on the rise, it is a pervasive topic of discussion with business owners. Along with inflation concerns, we have rising interest rates. We have already seen two rate hikes and additional increases are expected to be enacted at each of the Federal Reserve meetings this year. These factors result in higher costs for business owners. How can they plan accordingly?

How will rising interest rates impact business owners?

Without proper preparation, rising interest rates can have a substantial impact on business owners. To help prepare for the rate hikes projected by the Fed, business owners should reexamine their business plan. Businesses with company credit cards and existing loans could experience higher interest payments, less disposable income and bigger overhead fees, hindering long-term business goals.

It is important to keep in mind that payments can also increase as rates rise and higher rates have the potential to make long-term debt more expensive. Be sure to seek advice from your lender on the impact your current loans have on your finances. Then work with them to conduct an analysis on where adjustments to your financial and business plans need to be made.

What steps can business owners take now to prepare?

Taking early action to maintain profitability is essential when it comes to the upcoming rising interest rate environment. Consider if you can raise your prices to accommodate increased rates. While your initial reaction may be to shy away from increasing prices for your consumers, it is important that you are charging enough for goods and services to cover all expenses and provide a buffer of profit.

While rates have already increased, we know there are more hikes to come so now is the time to get ahead of the curve and consult your lender on refixing rates. Upon weighing your options, you may want to consider a fixed loan. However, with a commercial loan, the best option for your business may be to lock in your loan now at a lower rate. It is vital to take a step back and ask yourself, “Am I looking at loans with the long term in mind?”

If you choose to pay off your loans early, it may result in a penalty. But depending on your business plan and how drastically you feel you will be impacted by increased interest rates, paying the penalty might be preferable in order to avoid drawn-out payments with continually escalating rates. The bottom line is, it makes sense to consult an expert and determine what would work best for you and your company.

Rising interest rates can pose many unknowns when deciding what is best for your business. It is vital to work with a team of professionals to help you navigate rising rates and create a plan for long-term success and stability. To see what is possible with the commercial banking solutions our team can provide, contact us at 877-723-5571.

Univest Bank and Trust Co. is Member FDIC, Equal Opportunity and SBA Preferred Lender.