2019 Rates: What to Expect and How to Prepare

In recent news, outlets are reporting that there may only be one interest rate hike in 2019, in part due to the partial shutdown of the U.S. government, which has left hundreds of thousands of federal employees without a paycheck.

How do interest rate changes affect small to midsize business owners?

If you’re a business owner, aspire to be one, or work with business owners regularly, then you must understand the major ways that interest rate changes affect how companies operate.

1. High Interest Rates Make it Harder for Business Owners to Get Loans

Most small to midsize businesses have outstanding loans, and when interest rates rise, it is more expensive to pay them off. Further affecting future growth, raising interest rates make it more difficult to take out new short-term loans to help pay for unexpected expenses or to expand when necessary.

2. High Interest Rates Lower Consumer Confidence

When interest rates rise, consumers will have to pay more to lenders to repay their loans. This mean less disposable income left in their bank accounts to spend on products and services. Business owners providing luxury items may be hit harder than a company supplying basic staples.

What can business owners do now to prepare for the potential of rising rates?

1. Focus on Building Your Business Credit History

Having a strong business credit history means options: you can choose the lenders, creditors, and vendors your business works with. This allows for greater control over your business’ cash flow.

2. Review Future Growth Projections

Consider future rates when planning future growth projections, particularly those that will rely on a project funded by a loan. Even a 1% different in interest rates can make a significant difference in the price of the loan, and therefore the value of the project.

3. Review Current Terms of Your Outstanding Loans

Take time to review all of your current business loans now. Understand which loans could be affected by a rise in interest rates (due to a variable rate, for example).

If you need any assistance thinking through what interest rate increases mean for your business, don’t hesitate to reach out to us.



  1. https://www.cnbc.com/2019/01/07/feds-bostic-sees-one-interest-rate-increase-for-2019.html


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