Fed Lowers Interest Rates, Here’s What It Means For You and Your Business

The
Federal
Reserve
announced
it
will
lower
the
effective
funds
rate
by
50
basis
points
(0.50%).
This
officially
ends
an
aggressive
rate
hike
campaign
that
started
in
2022
to
quell
inflation
that
at
one
point
reached
over
9%.

Now
that
inflation
is
near
the
Fed’s
2%
target,
Fed
Chair
Jerome
Powell
announced
the
lowering
of

interest
rates
to
stimulate
economic
activity
from
consumers
and
incentivize
small
businesses
to
borrow
and
grow.

Here’s
what
this
decision
means
and
how
it
affects
the
costs
of
getting
a
loan
for
your
small
business.

Key
Points:

• Interest
  rates
  have
  dropped,
  making
  new
  fixed
  rate
  and
  existing
  adjustable
  rate
  loans
  cheaper
• Future
  rate
  cuts
  remain
  uncertain
  despite
  cooling
  inflation
• Refinancing
  could
  be
  a
  strategic
  move
  for
  business
  owners
  with
  existing
  debt

Federal
Reserve
Lowers
Interest
Rates
for
First
Time
in
Two
Years

In
the
first
time
since
the
country
reopened
post-pandemic,
the
Federal
Reserve
cut
the
federal
funds
rate.
This
rate
is
what
banks
charge
each
other
to
borrow
money
and
sets
the
bar
for
the
annual
percentage
rate
(APR)
on
mortgage
interest
rates,
credit
cards,
and

business
term
loans.
The
Fed
plays
an
important
role
in
watching
economic
activity
and
decides
where
rates
should
be.

In
2020,
the

Federal
Reserve
lowered
rates
to
nearly
zero
to
stimulate
spending
and
borrowing
as
the
world
grappled
with
economic
uncertainty.
During
the
COVID
initiated
shutdown,
consumers
could
borrow
money
for
their
business,
apply
for
a
mortgage,
and
other
loan
products
at
low
rates.
This
led
to
record-high
borrowing
levels.
Two
years
later,
inflation
rose
to
historic
levels
not
seen
since
the
1980’s,
leading
the
Fed
to
raise
interest
rates.
It
hiked
rates
11
times
between
March
2022
and
July
2023,
maintaining
its
current
level
for
over
a
year.

The
rate
has
kept
lending
costs
high,
putting
even
more
pressure
on
the
small
business
sector.
In
a

Minneapolis
Fed
survey
earlier
this
year,

63%
of
respondents
said


high
interest
rates

have
negatively
impacted
their
business.

Now
as
the
Fed
lowers
rates,
the
hope
is
that
businesses
will
see
cheaper
borrowing
costs
from
lenders
as
an
opportunity
to
reinvest
and
expand
their
enterprises.

What
To
Do
Now
and
What
the
Future
Holds

The
announcement
has
an
immediate
effect
on
small
businesses
today
and
for
the
foreseeable
future.

Rates
on
most
new
term
loans
have
been
on
the
decline
this
year,
and
this
announcement
will
likely
send
them
even
lower.

Rohit
Arora,
CEO
and
Co-Founder
of
Biz2Credit,
says

rates
may
not
drop
as
fast
as
they
rose
in
recent
years.
“The
ability
[for
the
Fed]
to
cut
rates
significantly
in
the
long
term
is
going
down,”
he
said.
This
is
following
the
latest
inflation
numbers
released
on
September
11,
stating
that
inflation
is
cooling
down
as
the
core
inflation
number
is
at
3.2%.
This
may
cause
the
Fed
to
be
more
cautious
about
cutting
rates.
Rohit
says
“it
isn’t
all
good
news
for
our
small
business
owners
just
yet.”

But,
there
is
still
room
to
rejoice
for
small
business
owners
looking
for
lending
options.
SBA
variable
rate
loans
are
immediately
cheaper.
The
lower
the
interest
rate,
the
lower
cost
you
will
pay
over
the
life
of
the
loan.

Additionally,
if
you
have
outstanding
loans,
you
may
benefit
from

refinancing
your
current
debt
or
consolidate
your
debt
to
lower
your
overall
cost
of
capital.
Rohit
advises,
“any
time
is
a
good
time
to
consolidate
debt”,
but
be
sure
to
account
for
closing
costs
and
fees
from
lenders.
If
you
don’t
have
any
outstanding
debt,
it
could
be
worth
considering
using
an
SBA
loan
to
grow
or
make
the
investments
you’ve
been
thinking
about.

Dan
Schuessler,
Co-Founder
of
MoneyGeek,
says
he
plans
on
spending
more
now
that
interest
rates
have
come
down.
“We
are
looking
to
ramp
up
online
advertising
spend
which
can
require
upfront
cash
for
revenue
that
doesn’t
come
until
later
and
lower
interest
rates
help
us
make
this
investment
and
improve
our
return
on
investment,”
he
said.

As
rates
continue
to
change,
you
may
be
able
to
renegotiate

terms
with
vendors.
Your
vendors
likely
face
similar
interest
rate
costs
to
you,
which
means
that
lower
rates
equate
to
lower
borrowing
costs
and
potentially
lower
monthly
payments.
Extended
payment
periods
or
reduced
prices
could
be
on
the
table,
so
be
sure
to
check
with
them
for
better
loan
terms.

But
before
you
apply
for
a
loan
for
your
small
business
to
put
a
down
payment
on
a
real
estate
acquisition
or
have
financial
flexibility
during
the
holiday
season,
consider
factors
like
your
need
for

working
capital,
personal
credit
score,

business
credit
score,
and

roadmap
for
the
short-
and
long-term.

Frequent
searches
leading
to
this
page

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business
lending,
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rates,

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