The Federal Reserve’s rigid moves to combat inflation will inevitably lead business owners to rethink taking on any new debt for expansion. The Fed continues raising interest rates to cool the economy and bring down inflation, but it is also putting a lending squeeze on small business owners, with rates not experienced since the 1990s. Rate increases raise borrowing costs, designed to cool spending and temper inflation. The Fed has raised its short-term benchmark fed funds interest rate by 3% already year, the last three times each 0.75% and we still have a couple months to go this year!

Whether inflation plummets or the economy falls into recession or stagflation (a combination of slow to no growth and high inflation) is unknown. Small business may need a loan to stay afloat. That endeavor can be prohibitive without a long enough business or credit history, not enough revenues or assets, enough of a loan to make it worthwhile for big banks.

Because Small Business Administration loans are floating-rate loans, they adjust based on changes in the prime rate. When there was a low-interest-rate environment, it wasn’t much of a concern. But with SBA loans based on the prime rate, which is now poised to reach 6.25% after the Fed’s latest 75-basis-point hike, these loans could reach the 9%-9.5% range. Demand for fixed-rate loans will rise because businesses want to lock in rates and have predictability in their payment amounts.

The current lending framework gives a lot of license to traditional banks to determine what businesses are deemed creditworthy. Sadly, small to medium-sized enterprises (SMEs) are at a disadvantage since they are typically a part of emerging sectors and lack the assets for use as collateral. Banks might see them as risks, and small businesses also face barriers such as a lengthy application process, the need for superior credit scores, and financial statements to illustrate performance.

With increasing barriers for business in the traditional lending space, consider alternatives such as Juniper. While traditional lender rates over the last few years have soared, Juniper answers only to itself and its clients, and rates have held steady. With highly competitive fixed rates, a streamlined application review process, and as a trusted Northwest resource for hard money loans for more than 20 years, Juniper becomes an attractive option.

Some small enterprises are able to get creative and “find” money through crowdfunding, microloans (nonprofits), block chain solutions such as DeFi, or even credit lines offered by popular accounting software companies. But for significant funding from an experienced private lender that knows the local market, consider Juniper. Give us a call and let’s get the conversation going.

If you’re seeking quality commercial real estate investments throughout the Pacific Northwest, we’re here to help. Juniper Capital provides private real estate financing, including hard money loans for commercial, construction, multifamily residential opportunities and more. If you would like more information on this topic, call us today.