Banks Are Lending, Rates Are Headed Up — Time to Act?

Posted on August 25, 2013

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If you asked a few months ago, I would have said the small business lending market continued to be tough. However, my opinion has recently changed. Four of my clients have gotten new loans over the past few months. One of these loans was specifically turned down last year, and I don’t think any of the other three loans could have been done a year or two ago, either. Two of the businesses are in industries that banks were running away from in the aftermath of the 2008 housing crisis. The loans were varied: a commercial property loan refinancing, a line of credit increase, and two new short-term cash flow loans.

So I’ve changed my opinion — banks seem to be lending.

At the same time, interest rates have started to increase. The 10-year US Treasury bond rate has increased almost 1 1/4% from May to today. The Fed has been keeping a lid on interest rates in recent years through its bond-buying program, but it is likely to start winding down the program. It seems likely that the strengthening economy and the end of the Fed program will lead to further interest rate increases. The question is how large the increases will be.

What does this mean for small business owners? I think it’s time to be thinking about borrowing. Here are three examples:
1) If you’ve been thinking about asking for an increase in your line of credit and were holding off, or if you asked before and were turned town, now might be the time to pursue the increase.
2) If you have a mortgage loan on a commercial building you own, especially with a floating rate, now might be the time to look at refinancing to a fixed rate or to a lower fixed rate with a cap.
3) If you are considering expanding by opening a new location or purchasing new equipment, now might be a good time to talk to your bank about a loan to finance the expansion.

If you have bank financing needs in your business, I do think it’s time to act.

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Posted in: Banks