Rising Rates? Get a Better Business Deal
By admin
Issued on behalf of FinanceXchange
THE trend for interest rates to continue to rise is becoming one of the biggest headaches for business today. It’s a fact of life that most businesses have to borrow to get started, to grow – or just survive. Businesses in the region in and around Swindon are no different from any other in the UK in this, with most businesses having to borrow money in some form, from a commercial mortgage, a business loan, or an overdraft to ensure there’s always money in the bank when cash flow is tight. Rising interest rates can mean only one thing – extra cost, and will affect businesses of all sizes. Unless a borrowing business has been shrewd enough to fix their interest rate then a rising rate will, of course, be passed on directly to the borrower. Even for those who did fix their borrowings this would have come at an upfront cost, and at the time of borrowing there would have been no guarantees that this additional cost would have been paid back over the term of the loan.
There are a number of wise old economic owls warning that interest rates could even reach the dizzy heights of 7.5 per cent before falling away again. If these fears are realised then what would be the threat to business? An interest rate of 7.5 per cent would be equivalent to – when adding on the bank/lender’s margin – anything from 8.5 per cent to 10 per cent. That is no small amount, especially on larger borrowings.
Of course, some will remember the dark days for business when rates were double what we’re being threatened with now and may question what we’re worried about. But on borrowings of say £250,000, then a rate rise to 7.5 per cent would be the equivalent of an additional £5,000 of interest repayments a year. Not enough, you may think, to seriously hit the borrower, but an additional and unwanted expense nonetheless.
So, with interest rates moving the wrong way, now could be the time to move your business loan/commercial mortgage. Just like many homeowners with personal mortgages, there’s a strong chance that as a business you’re paying more for your borrowings than you need to. There’s nothing anyone can do about the Bank of England raising base rates – but there’s certainly nothing to stop any business from negotiating a better borrowing deal, potentially saving a lot of money.
As always, be cautious of lenders offering fancy headline rates for the first year and then hitting you with higher rates and charges in the future, and always speak to an expert independent broker before making a final decision to move any business borrowings. But make no mistake there are savings to be made, so don’t just sit there paying higher rates and feeling miserable – go and get yourself a better deal. Saving money always makes sound business sense.
But if, of course, you are a fortunate businessman or woman with money stashed away in savings, then pour yourself a glass of bubbly, sit back – and enjoy your increased interest income!
