Why Rising Interest Rates Should Make You Reconsider Your Lending Relationships

*This post is from CMB partner Essex Lease. Visit them for flexible lending solutions.

As Canadian interest rates continue to rise amidst the intense pressures of inflation, many business owners are considering their options.

Virtually no area of the economy will be left untouched by rising interest rates, so it’s essential for business owners to take stock of their lending relationships now and begin to make a plan to assess and mitigate the potential impact.

While most businesses are used to weathering economic ups and downs, the present set of circumstances is certainly unique and will require an ‘outside-of-the-box’ approach.

Let’s take a look at some of the questions business owners should be asking themselves about their lending relationships as we navigate this period of rising interest rates.

1. Do You Have a Personal Relationship With Your Lender?

Are you on a first-name basis with your banker?

Have they taken the time to visit your operations on-site?

Do they understand the unique challenges of your industry, such as seasonality?

During good economic times, it can be easy to forget just how important a personalized approach is to your lending and financing relationships.

Unfortunately, during the tough economic times, traditional banks tend to be risk-averse and rigid in their financing terms. And that lack of relationship-focused lending and specialized industry knowledge can work against you.

A relationship-focused lending partner will take into account your business’s unique challenges and opportunities. When you have a personal relationship with your lender, your character and integrity become part of your business’s value proposition, and that leads to better lending terms and more flexibility.

2. Do Your Financing Terms Match Your Cash Flow?

Whether your business is looking to unlock working capital, finance new equipment, or restructure existing debt, working with a lending partner that offers flexible payment terms to match your business cycles is key.

And as interest rates rise, managing debt becomes even more critical for good business planning. Tools like asset-based lending can be essential for businesses to help manage cash flow during these challenging periods.

If a business owns or has sufficient equity in assets such as equipment, asset-based lending can help consolidate current debt and advance additional cash to cover expenses like fuel, repairs or payroll. Whether done through tools like a Sale-Leaseback or an Equipment Note Loan, businesses that work with an alternative lender have the opportunity to structure flexible terms that work for them.

3. Where Else Can You Reduce Costs?

As the cost of servicing debt increases, businesses may need to look to reduce costs elsewhere; this is another area where the right lending partner may be able to help.

For example, by working with a lending partner with specialized knowledge of your industry, you may be able to take advantage of cost savings such as:

• Selling underutilized equipment or buying used equipment instead of new.
• Saving money on insurance with a customized insurance plan.
• Consolidating debt. A lending partner can help you combine all of your loans and leases into a single contract, often reducing monthly payments while simplifying your bookkeeping.

4. Are You Making a Plan for the Future?

In business, good planning is essential. Businesses will need to assess the specific impacts rising interest rates have on their industry. Working with a lending partner with specialized knowledge can help.

As interest rates rise, the possibility of a recession continues to be a serious threat. It’s important to start laying a solid foundation now, and that begins by working with the right lending partner.

When it comes to rising interest rates, your business won’t remain resilient if you don’t have a financial partner that is ready to meet you where you are.

At Essex Lease Financial, we pride ourselves on going above and beyond for our customers. We’re a lending partner who will work to get to know you and your business on a personal level. Throughout the economic ups and downs, we help businesses get the most from their lending relationships.

If you’re ready to work with the financing experts that offer exceptional services, and a dedicated, personal touch, contact Essex today to get started!