Whenever the United States is faced with inflation or a recession, it is the Federal Reserve’s job to adjust the federal fund rate to combat that. The Federal Reserve generally lowers rates in order to stimulate growth, while increasing rates to slow inflation with the hope of returning to a more sustainable level.
So why should you care about the federal fund rate? As a small business owner, the federal fund rate is extremely important, because it directly impacts the prime rate. Prime rate impacts the rate small business owners will have to pay as they look for long-term financing to start, grow, or build their businesses.
Throughout 2022 and the beginning of 2023, the Federal Reserve has been raising the federal fund rate to combat the recession we are facing. And, for many small business owners, this is the highest they have seen it in many years. However, it’s not the highest it’s ever been. Between 1979 and 1983, the United States saw the highest prime rates in our history. Since then, the prime rate has shown significant increases in the 1980s, 1990s, and in the 2000s.
The good news is that historically the rate always steadies eventually and comes down.
Understanding the history of prime rate and how it fluctuates over time can help you understand some important considerations when you’re researching financing options. You don’t have to put your business goals on hold, you just have to partner with a financial institution that will help you to find the best rate structure option!
At FNB Small Business Finance, we have experience helping thousands of small business owners achieve their goals. With experience comes knowledge of many different types of businesses and their unique needs. Throughout 2022, we heard the concerns of the small business owner and changed our rate structure to help support their goals even during a volatile time.
When you need long-term financing, reach out to our team. We are ready to not only help you determine the best loan option but the best rate structure as well.