FED RATE CUT MEANS MORE BUYING POWER FOR BUSINESS BUYERS
Buying power is important in the small business world. Over time, this can help businesses expand, hire, and prosper. It can also decimate industries or even countries.
Recently, the FED dropped interest rates one quarter of one point. What does this mean to us? What does it mean for the small business world? A world that is dependent on interest rates, prime rates, buying power, and more.
For business owners: A drop in the FED rate means you can borrow money cheaper. You can now go to the bank, given your current financial situation, and borrow another $30,000 on a $500k loan. That $30,000 could be the difference of hiring that extra support staff, or not. The FOMC committee said the current state of growth is moderate and the labor market is strong. They decided to loosen policy anyway. In doing so, they have also left the door open to cut rates again in the future.
For business owners looking to sell: If you’re a business owner, this drop in the FED rate can mean a lot for you. Buyers are always calculating their buying power. On a million-dollar SBA loan, this could mean the difference of $50k. A buyer coming in, has more buying power, and can offer you more money for your business. The buyer can borrow more, or, get money for a cheaper interest rate, and, sometimes both. If you’re looking to speak with a broker about selling now or soon, give me a call at: 800-259-0637
For buyers looking to buy business: A drop in the FED rate is great for buyers. As a buyer, you’re always looking at the prime rate plus some spread. The lower the prime rate, the lower your adjusted rate will be. One thing to note for buyers: it could also increase the number of buyers. The result can be higher competition for the same business. This could create an auction environment for businesses, raising the prices.
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You can always call me on my cell, direct, any time: 800-259-0637
Aaron Thom, Sunbelt Business Advisors