How To Prepare Your Business For The Rise In Interest Rates

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It doesn’t matter how much success your business has recently received – there are always external factors out of our control as CEO’s and sometimes they can have a real impact on your business. In this case, we’re delving into the matters of Brexit, which threatens an even bigger increase in interest rates, making the management of finance more difficult for big and small companies alike. In order to avoid a cash flow crisis and keep thoroughly on top of your company’s finances, I have all of the tips that you need in order to prepare yourself for the unfortunate rise in interest rates.

Firstly Though, What Impact Will It Have?

Well, considering Brexit negotiations are still at their somewhat baby stage, nothing can be securely set in stone. We are still yet to uncover the real issue that businesses will face due to interest rate rises, particularly for consumer sentiment and the effect on spending habits. Nevertheless, we have already seen rises in interest rate, with historically low rates of 0.25% since the Brexit vote occurred, so it’s become apparent that this is something that all organisations need to prepare for.

As the CEO of my digital marketing agency, I am yet to face the real wrath of this rise, however it’s predicted that businesses operating in the retail sector are going to take a huge hit. The uncertainty surrounding Brexit is very much up in the air, and should retail companies fail to listen to the Bank of England’s forecast for 2018, there could be a large failure to meet payments or even sell extra stock. Fear not though, because I have the best ways in which you can prepare for these rises in interest rate.

Evaluate Your Debt Levels

Even the most organised businesses can find themselves swimming in a little bit of debt, so it’s always wise to revisit this and evaluate how you can handle them as quick as possible. One of the most important considerations to make at this point is whether the existing type of debt that you own is even appropriate for your organisation and the sector that you operate in. For example, imagine that you’re a business that has a high seasonal inventory and accounts receivable. Instead of this, it might be wiser to adopt an asset-based lending arrangement to swap out your conventional debt. If you’re anticipating changes in interest rate, particularly a rise, ensuring that your type of debt is suitable for the company is paramount.

Revisit Your Business Plan

In times of severe pressure, it’s always a sensible idea to go back to where everything started – your business plan. Essentially, as a business owner, you’ll want to ensure that at some point during your business’ journey, you can expand to greater lengths and operate on a national, or even international, scale. With interest rates expected to rise however, this could suddenly become problematic as profits will be more difficult to achieve. As the economy faces the increase in interest rates, the banks will also be obliged to charge more money for their business loans, so you can find yourself in a bit of a rut.

With all of this in mind, revisiting your business plan can help you to decide whether a short-term loan or long-term loan will complement the overall business objectives for growth. In this plan, always ensure that you take into account the rise of interest rates, and that way you’ll have some room for important capital that you’re required to pay.

Tighten Your Credit Controls

When struggling under the financial pressure, a good way to keep your business stable in times of interest rates rising would be to tighten your credit controls, as this way all of your company’s cash can be used more sensibly and meaningfully. To take a proactive approach, you should put your efforts to checking the credit score of new customers, which can be achieved easily by ordering a good credit report. Furthermore, you can’t leave existing customers out, particularly larger ones, as they’re even more crucial to your business. If you’re having problems retaining your existing customers, let alone monitor their credit ratings, you can read my last blog post for some top tips.

When the news of increasing interest rates is released, suddenly all native businesses are seized by a financial panic, but you can avoid this completely with intricate planning and preparation. All there is to do now is sit back and watch Brexit unfold, but don’t let it consume your business!