[Hedley Lamarr]

Just a few thoughts on a rising interest rate environment.

Business owners will continue to get squeezed especially if they are using traditional lines of credit to fund day to day working capital needs. Most business owners today have costs exploding due to inflation and supply chain issues. This is having a negative impact on gross margins and net income which reduces availability on tradition lines of credit. Some have had lines reduced or pulled. Adding insult to injury, the business owners suppliers are demanding higher cost and shorter terms and their customers are extending terms. I have seen many cases where customers that were N30 are now N60-N90 at best. This is having a huge impact on working capital. Business owners will need to find alternatives to fund working capital such as asset based lines of credit or factoring.

Finance companies are also impacted by raising interest rates. Finance companies using a discount fee only structure are already starting to get squeezed as most have credit facilities tied to interest rates. For the last several years many finance companies have been aggressive with pricing to win deals and compete with bank owned finance companies that have access to cheap capital. I am already seeing cases where a finance company has asked their client to seek and alternative lender because they are starting to get squeezed. Discount only structures have NO defense in an interest rate rising environment.

There are a LOT of finance companies in the market right now seeking lower cost of capital. A few have sold recently because they were not able to obtain facilities that reduced their cost in comparison to deals they aggressively priced already on their books.

[Olderguy]

Remember when mortgages were 18%? I think the government completely dropped the ball on the whole supply chain scenario. Dust off the defense production act and start producing.