How could the interest rate rises impact on SMEs?

15/05/2018 08:35


Whether an SME is just starting out or is well-established, it’s important that they always pay close attention to interest rates and consider how they might affect them both now and in the long-term.

 

The UK’s near-zero interest rate era is just about to come to an end and there is also speculation that there is another Bank of England increase on the horizon.


So, how much of a financial toll is this set to have on SMEs and what can they do to prepare themselves?

Recent studies have revealed that even a minuscule hike in interest rates could lead to massive cost implications for SMEs. A rise of just 0.25% would result in costs of £335m in the first year alone.



The downsides for SMEs


  • Increased risk – Risk is something that all business owners in today’s economic climate need to be prepared to deal with. The rise in interest rates and also the lack of fixed-rate lending that is available to small businesses is only adding to this risk. Only 11% of the money that is lend to small businesses is now done so on a fixed-rate basis. Banks have been preparing for rate rises but unfortunately this has meant that the risk has been passed on to SMEs.
  • Uncertainty – Because businesses are often unsure of the real costs associated with borrowing money, it becomes much harder for them to plan for the future. Without proper financial organisation and allocation, businesses run the risk of facing failure. 

 

With interest rates about to spike, and who knows by how much, now would be the time for SMEs to think about securing fixed rate loans. Having said that, the availability of these is often scarce and means that more often than not, SMEs are leaning on alternative types of finance to support their plans for the future.


Are you an SME owner on the lookout for an alternative type of finance for your business? We can offer both secured and unsecured working capital for businesses and we always take a personal approach when it comes to meeting your needs.

We know a ‘one size fits all’ approach won’t work, which is why we want to get to know your business properly so we can suggest finance that will work for you. Visit here to find out more about the loan options we provide. 

We aim to deliver much needed capital to start-ups and SMEs

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