It’s no secret that inflation has been exceptionally high this year and the Federal Reserve has been taking steps to help tame it, specifically raising interest rates at an unprecedented pace. The hope is that rate hikes will temper demand for consumer goods and services by making it more expensive to borrow money.
There have been seven Federal Funds Rate hikes in 2022:
- March 17 — 0.25% to 0.50%
- May 5 — 0.75% to 1.00%
- June 16 — 1.5% to 1.75%
- July 27 — 2.25% to 2.5%
- September 21 — 3.00% to 3.25%
- November 2 — 3.75% to 4.00%
- December 14 — 4.25% to 4.50%
Unfortunately, there are other issues at play that have an effect on inflation, including the war in Ukraine, shortages of semiconductors and worker shortages. Still, the Fed views raising interest rates as the best method to fight inflation since the new rates are effective immediately.
Banks are not required to follow the federal interest rate so each one will respond to the Fed’s rate announcement by adjusting rates in their own way—but it is typical for them to collectively raise interest rates in the commercial lending space. This makes it more expensive for small business owners to borrow money and may result in those with “A Paper,” a credit rating where the FICO score is 660 or above, bleeding into the alternative lending space, which is usually most attractive to those with lower credit scores.
At Clear Skies Capital, we expect to see more “A Paper” as interest rates remain high. But unlike many other alternative lenders, we will not be adjusting fees in response to this new development. We are maintaining our philosophy of partnering with small business owners to help them gain the resources they need to compete and thrive in the marketplace.
As a business owner, you may find yourself between a rock and a hard place right now, needing to invest in things like new equipment to remain competitive but finding the lending environment quite unforgiving. It’s important to know that unlike traditional lenders like banks, whose application and approval process can be cumbersome and often end with a “no,” alternative lenders are in your corner and focused on helping you make your business dreams come true, even in a challenging economy.
If you have questions about working with an alternative lender, call Clear Skies Capital at 800-230-9822. You may be pleasantly surprised at what you qualify for and at what rate.