When Flexibility Drives Family Business Success
In 1994, Dave Gravel found himself at a crossroads. As the
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Interest rates will soon increase, but proactive planning can help lessen the impact on your business and it’s growth.
Since the crash of 2008, interest rates have been—and remained at—historic lows, but that’s about to change. Clearly, stability is returning, as measured by a rise in jobs creation, GDP, and other economic factors, which signals an impending interest rate uptick. The Federal Reserve has been talking about hiking rates since the end of 2015 and, while it hasn’t happened yet, you still need to plan for it.
So, how might a rising interest rate affect your business?
From a business planning perspective, there are a couple of options when the forecast is for rising rates:
Among the best ways to plan - work with your banker. Capital is still very accessible, but the time to plan is now, before the rates change. One example, he or she can work with you to build cash flow forecasts in which loan rates are “sensitized” to account for the potential effects a rate increase will have on your financial condition (e.g., impacts on pricing products sold, operating expenses, deleveraging, etc.).
Regardless of the strategy you implement, a proactive vs. reactive approach is always better. Talk to your banker or financial planner about what steps might best be taken now, while your business is still in a position to leverage current rates.