Fixed, Long-Term Interest Rates Protects Against Rate Hikes

Posted: Updated:
Wojtowicz founded Indianapolis-based Cambridge Capital Management Corp. in 1983. Wojtowicz founded Indianapolis-based Cambridge Capital Management Corp. in 1983.

A Hoosier small-business owner recently told his banker that, “Interest rates are as low as they ever will be” in the foreseeable future, and he wanted to get a loan with a “friendly” rate.

The Fed made that official recently when it indicated  another quarter-percent rate hike will likely occur in December.  Most pundits expect there to be  three more rate hikes in 2019.

Small-business owners are under pressure to act if they are considering the purchase of a major, fixed asset.

People who own small businesses must make major decisions all the time. Decisions on marketing, launching a new product, whom to hire — or not — loom every day. Among the most significant decisions  is whether and when to buy major fixed assets such as a building or heavy machinery. Fixed assets potentially will influence a company’s success for years — even decades — in the future. Of course, they must be financed and paid for over a long time.

Even though financing is a crucial “must have” for almost any business, it’s a major commitment for an owner to add a monthly loan repayment to his or her budget. The repayment will be less of a burden if it a known amount that will not change over time. Locking in a low interest rate over a long repayment period is key.

So, it is time for a small-business owner to go shopping for an affordable loan. A local bank is a good place to start. Banks, large and small alike, compete to make business loans, and loan repayments are a crucial component of a bank’s income. But while large businesses have lots of options to arrange long-term fixed-rate financing, this can be much more difficult for smaller businesses. Those small customers may be most vulnerable and need to catch a break. And they also provide jobs and incomes for a large segment of their local populations.

Bankers can access so-called “alternative” financing that can help a small business. For example, SBA 504 financing can offer loans at very low  commercial rates and lock in that rate for 10 years, 20 years, even as long as 25 years!

These are the types of programs many small-business owners miss. They are busy running their business and handling the responsibilities that come with it; sales, employee relations, meeting payroll, upkeep on property, locating and buying inventory. Any small-business owner will tell you that running a company is a full-time job, with lots of overtime.

Small business owners rely on their banking relationships to search out affordable lending programs. And bankers, too, have a difficult job of keeping up-to-speed on financing options that will most help their clients.

The message for people who own small businesses is: it’s probably best to act now if you are adding a major, fixed asset. But do not be discouraged. You can get help. Assistance programs are available. Your banker should be able to enlighten you. And if one bank can’t, there is another on the next corner.

Interest rates will almost surely rise for the next few years. Locking in a lower rate now will save you, as a small-business owner, thousands of dollars over the life of your loan. And give you a consistent figure in your monthly budget.

Jean Wojtowicz is president of Cambridge Capital Management Corp.

  • Perspectives

    • Regional Investment Proposal Could be a Game Changer for Quality of Place Initiatives in Indiana

      While quality of place may be defined differently by people, a growing number of Hoosiers recognize the importance of this issue. In particular, the impact of quality of place on talent attraction and retention in a geographic area cannot be ignored. The future of every community is dependent on quality of place. Like many Midwestern states, Indiana is not growing at the same pace as areas in the southern and western regions of the United States.

    More

Subscribe

Name:
Company Name:
Email:
Confirm Email:
HTML
INside Edge
Morning Briefing
BigWigs & New Gigs
Life Sciences Indiana
Indiana Connections
INPower
Subscribe
Unsubscribe

Events



  • Most Popular Stories

    • GPC is a subsidiary of Kent Corp.

      Ag Manufacturer Begins Expansion

      Iowa-based Grain Processing Corp. has broken ground on an expansion project in Daviess County, which has been more than four years in the making. The company is investing $70 million to expand its Washington plant, which could create up to 20 jobs when complete.

    • Chromcraft Revington Acquisition Complete

      A Colorado company has completed its previously-announced acquisition of West Lafayette-based Chromcraft Revington Inc. As a result of the $3.5 million deal, Chromcraft will operate as a wholly-owned subsidiary of...
    • Purdue Touts New Autism Research Center

      Purdue University says it will expand community programs, resources, collaborations and faculty members researching autism with the development of its new Purdue Autism Research Center. The center has 20 faculty members from the colleges of Health and Human Sciences, Education, Science and Veterinary Medicine.

    • IU Kelley Tops U.S News and World Report Rankings

      Indiana University's Kelley School of Business is ranked first among online MBA programs and online master's programs in the most recent U.S. News and World Report Best Online Education Program rankings. Ball State University's Miller College of Business also reached the top 20 in the online MBA rankings.

    • Skilled Nursing Facility Proposed for Merrillville

      A new $7 million skilled nursing facility is being proposed in Merrillville. Our partners at The Times of Northwest Indiana report the development would include five residential buildings outfitted with 12 beds, a dining area, beauty salon and spa.