As owners of your business, it is important to keep a watchful eye on interest rates and the differences between fixed and variable rates. With the reinvestment needs of your business continually increasing, loan balances and the interest you pay increase as well. Reducing these loan payments can help with your cashflow.
Right now there is a potential opportunity to save interest expense by fixing or locking in your interest rates through the remainder of the loan, thus saving your business tens to possibly hundreds of thousands of dollars a year, depending on your current interest rates and loan balances.
Typically, variable interest rates, also called floating rates, are lower than fixed interest rates. Generally speaking, variable rates reward you with a lower rate to take on the risk of interest rate fluctuations.
Currently, this variable-to-fixed-rate relationship is inverted. Fixed interest rates are lower than variable rates, giving you an opportunity to fix at a lower rate without taking any interest rate risk.
You can visit our website for the most current lender rates from leading national lenders.
WARNING: Fixed rates are tied to “prepayment penalties,” which are penalties associated with repaying loans early, potentially reducing your flexibility in the future.
Please consult with your financial advisers to make the best and most informed decision for your business. As noted above, this is not the typical rate environment, so this potential opportunity could only last for a small amount of time.
Please call our office at 770-785-7855 if you would like more information.
Frank McLaughlin is a partner with Antares Group, Inc. He can be reached at fmclaughlin@antarescpas.com.