Interest Rates on the Rise? What Small Business Owners Can Expect in 2017


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Small Business Loan Rate Outlook The current WSJ prime rate is 3.75. For a new business taking out a Small Business Administration loan for the first time, the actual interest rate could amount to the prime rate + 2.5% to 2.75% (maximum) on a variable loan. Meanwhile, the interest rate on an SBA loan for an existing business would commonly be the prime rate + 2% to 2.25%. With the potential of a 1% increase in the prime rate by the end of 2017, the total interest rate could be up to 7% on an existing loan and 7.5% on a new loan. Economic Signs As a business owner, it is important to watch for macro trends in the economy. One important trend to monitor is real estate prices. Property values, which serve as collateral for small business loans, are a good indicator of how quickly interest rates rise. So as real estate appreciates, interest rates will adjust in a quickly improving economy. Reduce Your Financing Costs Ultimately, the only way to reduce borrowing costs is by cutting the principal on your loan. Self-funding your business by upping your equity will dramatically lower the financing amount. As an SBA loan borrower, consider boosting your equity stake from the required 25% (existing) to 33% (new) on a loan to 40% or even 50%. How Pango Financial Can Help Use your retirement funds through Pango Financial’s DreamSpark Plan to self-fund your business. Rollover various retirement plans including: 401K, IRA, PSP, 403(b), SEP IRA, or Gov 457(b). Your retirement funds are tax-deferred and penalty-free through the DreamSpark Plan.]]>