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As the US Economy contends with higher-than-normal inflation, the Federal Reserve has been in the spotlight. As our central bank focuses on controlling inflation the main tool at their disposal is increasing interest rates. As you have likely seen in the news, the Federal Reserve has raised rates twice already in 2022 and says further increases are likely in the coming months.
Interest rate increases impact everything from mortgages to credit cards to auto loans. And yes, they also impact commercial loans and loans for your small business. In short, as the Federal Reserve raises interest rates, small businesses are going to see rates for borrowing money increase. While rising rates may cause some anxiety for business owners there are ways to still ways to access the funds you need to grow your business while getting a fair interest rate.
First and foremost, working with a community bank during times of rising rates can give you a leg up when it comes to securing a great rate. Community banks take the time to learn your business, assess your needs, and find a solution that is custom to your business. Using this bespoke approach usually means finding the loan product that has the best fitting and lowest rate.
Secondly, utilizing a community bank that has the full toolbox of SBA loans is a fantastic way to protect yourself from further rising interest rates. Nearly every SBA loan available on the market has a maximum interest rate that is set by the SBA. This is done to ensure the small businesses of America have access to capital at a fair and reasonable rate. Additionally, finding an SBA Bank that holds their SBA loans locally usually means that you will find one of the lowest rates. When banks hold their loans locally the bank sets your rate; whereas banks that sell off their SBA loans are more impacted by the swings of the interest rate markets. At PyraMax we believe in holding our SBA loans locally.
Lastly, the SBA continues to have special programs such as the 504 loan that provides access funds for equipment or real estate that are at below market rates for longer terms. This allows not only one of the lowest rates available, but you then know your rate is locked in for 10-25 years.
Rising interest rates are likely going to be in the news and on the minds of business owners for the foreseeable future. Just because rates are rising does not mean it has to cause consternation or trouble for your business. Finding the right banking partner and using an SBA loan can make sure you have access to some of the lowest rates out there.