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As interest rates rise, borrowing naturally becomes more expensive. The increase in interest rates has been widely discussed in recent weeks, but the focus of these conversations tends to be around mortgage rates. However, rising interest rates are a vital consideration for businesses. Given more interest rate hikes are already on the horizon for this year, small and medium enterprises (SMEs) and larger corporations alike are evaluating their current debt facilities.
Increasingly, we are seeing more businesses assessing how future rate rises are likely to affect their costs moving forward and approaching us to discuss their options. This is par of the course any time interest rates rise but is especially important at the moment, given inflationary pressures will likely continue to impact the wider trading positions of many companies.
Naturally, when looking at costs, particularly for debt, it’s imperative to ensure your business has the most competitive finance package. Doing so will protect you from further rate rises and provide some surety around the cost of funds. As corporate finance brokers, Enness are well-positioned to support businesses with a comprehensive search of the market.
With liquidity remaining in good supply, lenders are finding a more competitive marketplace when trying to win new business. As a result, price, service and value-adding ancillary services become much more important when assessing the best lender to proceed with.
There are many lenders that offer corporate finance, and we will be able to source the most competitive packages from these parties. We will start by looking at your current package and understanding your requirements for finance – this is always about more than just the rate. Elements like how long you want to borrow for, how much you want to borrow and the terms that would best suit you will affect which lender is going to be a best match for you. We will always be working to get you the most competitive rate, but this might not necessarily be the cheapest available. For example, you may prefer to pay more for a longer fixed-rate or more flexible terms. Sometimes, a slightly higher rate to have more certainty or flexibility is a trade-off our clients are very happy to make.
If you have a good relationship with your lender, it will be tempting to approach them and explain that you are considering seeking more competitive deals. Many businesses do this in the hope of renegotiating a more advantageous arrangement with their present lender. However, it’s not always beneficial to share plans with your current lender before exploring other options: lenders are best motivated by hard facts presented in the right way– not, ‘We want a better deal, what can you do?’
Working with a broker to identify corporate finance alternatives is a better course of action. When your broker has secured an alternative offer you would be happy to accept, your broker can approach your current lender to see if they match or better it. In this way, your lender is better incentivised to listen to your requirements, and you stand nothing to lose if they don’t offer a deal you are happy with. Renegotiating requires finesse, and we can secure the best deal either from a new lender or an existing one.
Even if you already have established debt facilities and/or are seeking new facilities to support growth or acquisitions, getting a new funding package still requires time. A new lender will still need to underwrite your loan and assess your business' suitability for a new debt facility, and you will need to ensure you have time for your broker to negotiate a new deal in good time. This is especially important if you have certain key events on the horizon, such as a new contract to fulfil, new employees, etc.
Enness can help you quickly source and negotiate new funding offers, but it’s always prudent to get in touch as soon as possible. Many businesses are considering interest rate risk mitigation strategies, such as traditional fixed rates or hedging products. Now is an opportune time to review your current business debt facilities.
While interest rates are on the rise, good finance packages are available, especially for companies poised to grow or who can leverage debt to increase revenue quickly. Lenders still want to lend, and if you are in a solid financial position, you will find we can source very competitive rates and terms. Showcasing the strengths of your company’s position and the opportunities borrowing will present will be vital to getting the best corporate finance package.
Whatever your finance requirements, Enness will help you find the best deal tailored to your business' specific needs.