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How Smart Business Owners are Finding Certainty in Today’s Rising Interest Rate Environment

With soaring inflation and volatile financial markets, the Federal Reserve is steadily increasing the rate banks charge each other for overnight borrowing to a level that hasn’t been seen since before the Covid pandemic crisis began. This leads to banks raising interest rates on loans given to businesses and influencing credit decisions. The Federal Reserve's hope is that these actions will curb spending, reduce demand, and therefore bring inflation and prices back down to reasonable levels.

But what does all this mean to a small business owner? Rising rates generally lead to increasing costs for running a business. Why even consider new financing options amid rising interest rates? Not only can an SBA loan from CMDC help reduce your capital costs, but it can also help improve your cash flow.

1. SBA 504 Loan rates are fixed, removing interest rate risk

SBA 504 loan financing allows business owners to fix their business occupancy costs rather than worry about market instability or rising rates. SBA 504 rates are fixed for the life of the loan with no pricing adjustments.

 

2. SBA 504 Loans are long-term vs. short-term

Most loans from commercial banks are typically short-term meaning you’ll be subject to loan reviews and repricing on a regular basis during a period of rising interest rates. An SBA 504 loan is a long-term, fixed-rate loan that provides stability for small businesses that are already facing unknown day-to-day impacts. The SBA 504 loan offers terms of 10, 20 or even 25 years that are fully amortized loans, and there are no balloon payments. This enables a small business owner to pay for a facility over the long term while avoiding risky loan call provisions typically required by traditional lenders. You give greater clarity and security to your unknown situation. 

 

3. SBA 504 Loans allow you to borrow more money with a lower down payment

As a business owner, you know the importance of liquidity. With financing available for up to 90 percent of project cost, the 504 loan offers a 10 percent down payment (compared to 25 or 30 percent through conventional bank financing), enabling your business to conserve working capital.

 

We’d love to help you grow your business with an SBA 504 loan! Apply today or reach out to us with any questions about CMDC or an SBA 504 loan for your small business! 

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