From looking at financing options with fixed rates to diversifying your investments, here are eight answers to the question, “What are helpful tips for preparing a business (such as manufacturers, construction companies, retail stores, etc.) for rising interest rates?”
- Delay Expansion Plans
- Review Your Investment Portfolio
- Adjust Your Cash Flow Management Strategy
- Focus on Employee Financial Health
- Leverage 0% APR Financing Options
- Prioritize Your Variable Interest Rate Loans
- Update the Budget Regularly
- Invest in Long-Term Securities
Delay Expansion Plans
I’ve experienced the effects of rising interest rates firsthand and have learned that it’s important to plan to protect your business. One tip I suggest is to delay any expansion plans until you know how the interest rate fluctuations will affect your operations. Look at financing options with fixed rates, thus protecting yourself if rates do rise suddenly.
Use conservative budgeting across the board to prepare for this eventuality as well. Taking these steps can help prepare your business for any changes in the economy, giving you peace of mind no matter what happens.
Antreas Koutis, Administrative Manager, Financer
Review Your Investment Portfolio
One way to prepare your portfolio for rising interest rates is to review it regularly. This will help you identify any areas that may be vulnerable to rising rates. For example, if you have a lot of debt, you might pay it down or refinance to a lower rate.
You may also want to consider your asset allocation. For example, if you have a lot of money invested in bonds, you might shift some of that into stocks. This is because bonds lose value when interest rates rise.
As interest rates rise, it’s important to review your investment portfolio. This may include making adjustments to your asset allocation, rebalancing your portfolio, or paying down debt. By taking these steps, you can help to protect your portfolio from the effects of rising interest rates.
Brandon Brown, CEO, GRIN
Adjust Your Cash Flow Management Strategy
One tip for preparing a business for rising interest rates is to review and adjust your cash flow management strategy. When interest rates rise, the cost of borrowing money increases, which can affect your cash flow.
To prepare for this, you can start by reviewing your current debt and assessing whether refinancing at a fixed rate is a viable option. You may also want to consider delaying any major investments or projects that require significant financing until interest rates stabilize.
In addition, it’s important to review your accounts receivable and accounts payable processes to ensure that you are receiving payments in a timely manner and not making payments earlier than necessary. This can help improve your cash flow and reduce the impact of rising interest rates.
Luciano Colos, Founder and CEO, PitchGrade
Focus on Employee Financial Health
I understand that the well-being of my workers is intrinsically tied to my success as a company, so I’m ramping up a program that provides affordable financial advice to my workforce.
Employees who want to know whether to pull out of the stock market or if that variable rate is still a good option will consult a trained professional.
Knowing that their finances are in order allows workers to focus on the day-to-day tasks of the company. They’re under less stress, more focused on the future, and motivated to work hard and earn more. It’s a benefit worth paying for.
Debbie Winkelbauer, CEO, Surf Search
Leverage 0% APR Financing Options
With rising interest rates, high-ticket retail stores need to prepare for the change by offering new value-price-point products and 0% BNPL financing options. This will help ensure that customers can still purchase a product they truly need at a price they can afford today or with no additional interest rate fees. This can help you remain competitive in the market and continue to attract customers even during times of economic uncertainty.
Marc Werner, CEO and Founder, GhostBed
Prioritize Your Variable Interest Rate Loans
The first step to take when interest rates start rising is to look at your variable interest rate loans, typically seen in credit cards and lines of credit. Make sure those high-interest rates are the ones you’re paying off first and in full every month. Don’t let those balances stay open when interest rates are high. If you aren’t able to pay them back fast enough, consider taking a fixed-rate loan instead so you can better predict the interest rate.
For your customers, be prepared for any startups or venture capitalists to potentially reduce their spending. Many startups lack cash flow and instead use loans to do business, and a lot of venture capital depends on a variable rate as well. If the cost of their funding goes up, they will probably have less budget to spend, which could lead to fewer sales with your business.
Thomas Samuels, President, Cardinal Expo
Update the Budget Regularly
One tip for preparing a business for rising interest rates is to review and update the budget regularly. Proactively tracking changes in costs and revenue streams can help businesses plan for any changes in interest rates and ensure they are prepared to absorb the costs. Regularly reviewing and updating the budget helps businesses prepare for the impact of increasing interest rates and take advantage of any chances that arise.
Scott Orn, Chief Operating Officer, Kruze Consulting
Invest in Long-Term Securities
One tip for preparing a business for rising interest rates is to diversify your investments. An uncommon example of diversification involves adding bonds or mutual funds with long maturity dates to your portfolio.
Doing this hedges against short-term fluctuations in the market because these securities typically remain stable over longer investment periods. These assets appreciate when there are economic downturns because of their fixed coupon rate, even as interest rates move up and down, providing an opportunity for gains in your portfolio.
Julia Kelly, Managing Partner, Rigits