An Often-Forgotten Topic: Interest Rates
Wow! If you watch the headlines in the dairy industry, you’ll note that there are a tremendous number of changes going on. Exports are up in some markets. Others are down. Block cheese prices are up, but barrels are down. The trade balance is changing, and our recent government shutdown is impacting some reports we receive. However, while all of this is true and likely of interest to you, there is another factor that you might just want to look at – interest rates. They represent an area that has not received a lot of attention lately, simply because they have been so low since 2008’s financial crisis.
While they have been on the rise during the past two years, rates are still likely below our historical averages. Many of my Clients have been working off of fixed rates for the past several years, and there is still time to look them over. It might just pay to check them out. While the Federal Reserve Board signaled today, as I write this article, that they will be exhibiting “patience” as they move forward, what does that really mean?
One thought is that they will hold off on rate increases in the short term until they have made certain that the economy is truly on the track to recovery. Could this “pause” in interest rate increases present an opportunity for you? Possibly. This would be an ideal time to at least look at potential fixed rates. You may choose not to fix any of your rates. However, do take a look at what the impact would be of fixing your rates in comparison to what several ¼% rate increases would cost.
Essentially, if your rates start to climb, how will those rate increases impact your cash flow? A lot of the impact will depend on your current debt levels, but it is always good to know the potential effect of rising interest rates on your bottom line. If you are having challenges cash flowing today, what will happen if we see some rate increases? Be sure to run the “What If?” scenarios of potential rate increases to see if some fixed rates make sense for your business.
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If you have any questions, please e-mail me at firstname.lastname@example.org. I’m always open for a follow-up call and, as always, wish you the best of success!