Rising Rates vs. Proactive Business Strategies

August 2017

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?

  • It means the costs of borrowing will increase. A rise in interest rates can have a significant effect on your interest expense, which will impact your cash flow and bottom line.
  • Your customers may have to pay more interest on their personal loans - the higher the interest, the less money in their pockets. Ultimately, this lessens their ability to buy products and services, so your business may suffer from a decrease in sales.

From a business planning perspective, there are a couple of options when the forecast is for rising rates:

  • Lock financing into a fixed rate--as opposed to variable rate--which helps to quantify your future loan expenses.
  • For those currently in fixed rates with maturities in the next two or three years, consider refinancing to gain longer terms at current low rates.  The alternative is waiting to reassess when your note matures and “gambling” on what rates might be at that point.

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.

About the Author
Kevin Rourke

Kevin Rourke

SVP, Commercial Lending

Kevin joined the Salem Five team in April of 2012. Working out of the Corporate Office in Salem, Kevin oversees all aspects of the bank’s $2 billion commercial banking division, which includes C&I, Commercial Real Estate, Construction and Aviation Lending, and Cash Management. He also serves on the bank’s executive management team.

Prior to joining Salem Five, Kevin was senior vice president in the commercial division at Eastern Bank, where he was awarded four “Pinnacle Club” sales awards. Before that, he was a principal at Fabri & Rourke Insurance Agency, which afforded him the unique perspective of directly understanding the banking relationship from both a client and a lender’s point of view, and a commercial lending vice president at the former Fleet Bank. He holds a bachelor’s degree from Amherst College.

An active member of the local community, Kevin currently serves as a vice president and Board member of the Essex National Heritage Foundation, former Treasurer of Aspire Developmental Services of Lynn, former Board member at Salem Country Club and current Town Meeting member for the Town of Danvers. Kevin resides in Danvers with his wife and two children, who keep him very active in their pursuits including youth sports, theater and horseback riding events.



  • Commercial Finance
  • Strategic Planning
  • Growth Trends
  • Credit and Underwriting