Need a Funder or Vendor? START HERE

Results 1 to 2 of 2
  1. #1
    Senior Member Reputation points: 337045
    Join Date
    Mar 2015
    Location
    Rock Ridge
    Posts
    3,453

    Rising interest rate environment.....

    DF,


    The FED raised interest rates again yesterday and will likely raise rates two more times before year end. LIBOR is nor 2.05%. What effect does this have on customers? What effect does this have on financial institutions? Opinions please:

    Customers-Some are locked into fixed rates on commercial loans and real estate loans. This will not affect those customers much unless they have to enter the market for more debt or come up for renewal. They should be thinking now how to adjust operating expenses or margins to soften the blow if their rates go up. Those customers in floating rate facilities need to adjust their business models now. Some may consider selling their companies now that valuations are somewhat high and debt is fairly cheap to lever. If rates keep going up, leverage gets more expensive and valuations start coming down.

    Financial Institutions: For non-bank institutions rate increases will get very tricky. Most non-bank lender's facilities are floating with the rates. That being said, their cost of capital is now going up. The deals they have done for the last 12-18 months are now getting squeezed. Non-bank lenders will have to adjust rates up to stay profitable, but will have a tough time winning deals when there are hosts of bank owned finance companies that have emerged in the last few years. Hence the reason a lot of non-bank finance companies are for sale right now.

    Lenders, funders, and brokers need to educate the customers about the rate increases and how and what products to use to efficiently finance their companies. This is a tough sell because everybody has been screaming "I've got cheap money on lose terms" for the last 5 years.
    Hedley Lamarr......That's Hedley

  2. #2
    Great points, and agreed. It is a tough sell, but you hit the nail on the head with Educating the customers.

    This is an environment we are all subject to, and most of the time small business owners are so tunnel-visioned on their day-to-day ops, the last thing they are up on is the Fed's rate hikes, where LIBOR is sitting, and how that affects them. They truly appreciate someone guiding them through the landscape and how they and their options fit. Products may be getting more expensive, but Consultative Service is the Value what wins for all parties in the end.

    -FundingStrategist
    https://fundingstrat.com

Similar Threads

  1. Fast and affordable loan at 3% interest rate
    By aaida123 in forum Business Loans
    Replies: 8
    Last Post: 08-01-2016, 02:11 PM
  2. LoanMe now offers 0.00% Interest Rate Loans!
    By LoanMe in forum Promotions
    Replies: 4
    Last Post: 06-09-2016, 05:33 PM
  3. Anyone with clients that want better interest
    By Freeflowingfunds in forum Help Wanted
    Replies: 0
    Last Post: 08-19-2015, 02:09 PM
  4. Can A Company Lose Money When It Charges A 50% Interest Rate?
    By isaacdstern in forum Merchant Cash Advance
    Replies: 11
    Last Post: 10-22-2014, 04:45 PM
  5. Nontraditional lenders rising in importance for small businesses
    By isaacdstern in forum Merchant Cash Advance
    Replies: 3
    Last Post: 01-08-2014, 04:54 PM


Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  


INDUSTRY ANNOUNCEMENTS

SubcontractorHub, Lendica partner
BoA launches business loan marketplace
Quickbooks adds new LOC product


DIRECTORY