Over the last several years we have lived through a period of extraordinarily low-interest rates. And for some business owners, they assume this is the norm.
I am often asked, "what do I think will happen with interest rates going forward?" And until recently I always answered with a joke "If I knew for sure, I would be on the beach in the Bahamas drinking martinis !!!"
But recently my answer is different. I think interest rates are going to keep going up (as they have the last few months) and this is a smart time to lock up long term fixed interest rates where possible.
We are in a period of economic growth, and tremendous uncertainty. There are new sheriffs in town in Washington. And as I wrote about in my last column, we have seen business lending by banks slowing down.
Here are five steps business owners should consider.
- If you foresee real estate purchases over the next year or two, you might wish to accelerate your search. Interest rates could be much higher in a year, and make the cash flow prohibitive.
- Look at the SBA 504 program for equipment and real estate purchases or refinances. This program offers exceptionally long fixed interest rates with ten percent down.
- Review your current loans and be sure you understand what happens at different trigger points in the agreement. If you have an arm, what happens at the next bump?
- If you own real estate without any debt on it now, consider getting a loan against it with fixed rates and use the cash to pay off other variable debt or invest in your business.
- If your line of credit is close to maxed out, consider terming some of the balance out with fixed rates.