Small Business Owners Won’t Be Bruised by Federal Reserve’s Looming Rate Hike

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Small business owners shouldn’t worry about the Federal Reserve’s upcoming policy shift. That’s because the Fed’s initial rate hike is likely to be small, totaling 25 basis points. ‘The increase is small enough that it won’t affect small business financing,’ said Candace Klein, the chief strategy officer at Dealstruck, an online alternative lender to small businesses. But over the long haul, the Fed’s subsequent rate hikes could affect some of the more capital intensive small businesses. Higher rates increase the cost of capital for borrowers. ‘Home builders could be impacted and we could see a slowdown within the construction part of small business,’ said David Solis, national executive for small business centralized sales at Bank of America (BAC). Overall, the Fed hiking rates signals that the economy is strong enough to stand on its own two feet without the central bank’s help via low interest rates, a type of stimulus the Fed uses to revive sluggish growth. ‘We have a clients and a number of small businesses across the country that have started to increase investments into their business,’ Klein added, referring to higher confidence among small business owners. TheStreet’s Scott Gamm reports from New York.

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