After a year of interest rate hikes, recent headlines say the Federal Reserve may finally start cutting interest rates in 2024. What does this mean for Small Business owners?
Reduced interest rates makes short-term financing like a line of credit or term loan more readily available to small businesses, allowing growth that could have been paused during times of high inflation. That’s great news! But it’s not something to dive into without being prepared.
Know Your Options
Both traditional banks and alternative lenders offer different types of financing products, all with unique benefits. You need to understand which product is right for your specific business needs, your business model, and how much money you really need so you don’t overextend yourself. p.s. The best lending brokers will have dedicated team members to talk you through the process.
Have a Plan
You also need a plan for how you will use the capital you access. Small Businesses typically seek financing for things like purchasing equipment, investing in inventory or completing a project. Recently, many struggle to hire employees. And when owners can secure loans at a lower interest rate, they can reinvest those funds into to provide better pay and benefits to attract team members.
Get Ready to Apply
Entrepreneurs looking to jump on more attractive borrowing environments should gather all required documents and have them available when the time comes to apply. At a minimum, these include proof of identity, proof of ownership and bank statements. It’s worth noting that alternative lenders typically require less documentation than traditional banks in addition to taking less time to approve loans and get funds in your account.
Understanding your business financing needs, having a plan for the funds and preparing documentation in advance will make the process for accessing capital smoother, regardless of what the Fed decides to do with interest rates and when.