For some time, business owners have enjoyed the benefits of low-interest rates for commercial loans. Something is comforting about knowing that low-interest loans are available, even if you never apply for one. However, with news that commercial loan interest rates are expected to rise between now and 2023, we’ve seen an uptick in borrowers who want to get in while the getting is good. I understand this mentality, but it’s not one that I fully support.
It’s not that I don’t want people to take out loans. If you’re in a position to borrow money right now, this is a great time to do so. But it’s only worth it if you actually need the money. Interest rates are low, but prices are high, and overall incomes have not increased. If you’re on the fence about taking out a commercial loan soon, I think you should consider the following.
The purpose of a commercial loan is to strengthen your company and put you in a healthy financial position. In some cases, a small business loan is just what a company needs to expand. If this sounds familiar, congratulations! You’re on your way to the next stage of your business growth. However, it is not wise to take out low-interest loans that won’t improve your bottom line.
Locking in this low-interest rate to expand your facility or build a new commercial space sounds ideal. But it’s essential to take into consideration the current cost of building that space. The increased cost of a building project may eat up any savings you get from a lower interest rate. Before you take any steps toward getting a business loan, do your research. Whether you’re building a commercial space, expanding your staff, or upgrading equipment, you should enter your loan process with a sense of how much your investment will cost.
If you’ve been around here for long, you know that I take a common-sense approach to banking. I believe business owners should make intelligent decisions for the benefit of their companies, even if that means they don’t take out a business loan with my bank. Sometimes, even when you feel driven to expansion, the best thing you can do is wait for the money to make sense, even if that means putting up with higher interest rates.
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