Real Estate Strategies for Small Business Owners as Rates Rise

In a rising interest rate environment, the cost of capital is edging higher for all small businesses, but especially those who need to purchase property. As a result, U.S. entrepreneurs are returning to banks in large numbers seeking to finance real estate projects.

In many respects the current business climate is perfect for an uptick in small business lending. Business optimism has reached its highest since July 2007, according to the Wells Fargo/Gallup Small Business Index, with a reading of 100 in February, up from 80 in November and 33 points higher than a year ago. Business owners are taking advantage of a better financial situation, enjoying increasing revenue, stronger cash flow and improving access to credit. Since the 2008 financial crisis, small business owners have relied heavily on loans with adjustable interest rates. After all, interest rates were near zero for almost a decade. Now that’s changing. The U.S. Federal Reserve in March increased interest rates for the third time since the financial crisis. While the Fed’s benchmark rate remains at a very low level, below 1 percent, the average interest rate on a 30-year mortgage has risen a half a percentage point higher over the last year, as has the U.S. Prime Rate, the benchmark rate for many small business loans.

Small business owners seeking

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