On September 26, 2018, the Federal Reserve increased the funding rate by .25%, causing a range of financial changes in the economy that are already starting to affect small businesses nationwide.
Should you be worried? Use this guide created by NBC’s Business Financing Advisors to make sense of the recent prime lending rate hikes, and find out whether or not your business is in danger.
The prime rate is the standard rate of interest for money borrowed by banks and traditional lenders in the US.
The number is decided by taking into account the risk involved in lending to different types of businesses, and how they plan to spend the borrowed capital.
The Federal Reserve raises or lowers the prime lending rate as changes and fluctuations within the business economy occur. Click here to see the exact formula used to determine the prime lending rate.
The Federal Reserve increased the prime lending rate from 5% to 5.25%. This raises the prime rate .25 base points since its last increase.
The prime lending rate increased on September 26, 2018.
Businesses borrowing from banks and traditional lenders are already starting to feel the effects of the increase immediately.
The thought behind why the Federal Reserve keeps increasing the prime lending rate makes sense—at least in theory.
Since Trump’s Tax Cuts and Jobs Act was put into effect last year, the US business economy has been stronger than ever. In fact, studies from the National Federation of Independent Business (NFIB) indicate that the economic climate in the US is the best it’s been in 30 years.
With over 1.5 trillion promised in tax cuts for businesses of all sizes, businesses across the country are given the breathing room to grow and expand their businesses like never before.
This current boom in US business outweighed any concerns by the Federal Reserve as to how their prime lending rate increases could potentially negatively affect businesses—even those on tighter budgets than most.
For businesses with stable and consistent revenue, the recent prime lending rate increase of .25 base points are not going to pose much of a threat.
For others, increasing rates are posing a serious threat. Thousands of businesses are being held back from getting the extra capital they need from banks and traditional lenders, keeping them from overcoming business challenges, and seizing opportunities for growth.
While securing government regulated financing options such as small business loans (SBA loans) might be the best possible option for some businesses, considering all the alternative business financing options NBC has to offer will still save them significant amounts of capital by avoiding the rising prime lending rate.
In a time when banks and traditional lenders are offering loan options with higher and higher interest rates, businesses should explore alternative business financing options that are not bound to the prime lending rate.
There are many new types of alternative business financing options that cannot be offered by banks and traditional lenders.
Most of these options offer interest rates that do not depend upon the algorithm results that decide the prime lending rate, but instead are based on the specific business goals clients wish to accomplish.
Here are a few examples of alternative business financing solutions that do not contain interest rates determined by the prime lending rate:
Contact National Business Capital’s team of business financing advisors at (877) 482-3008, on call 24/7 to listen to your story, and help you decide if your business would benefit most from alternative financing options that aren’t affected by the prime lending rate increase.
Or, fill out NBC’s 1-minute, 1-page application online to receive funding in as little as 24 hours.
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!