We often don’t realize the impact that interest rates have on the economy and businesses around us. In terms of Florida commercial financing, the interest rates greatly affect local businesses and large commercial industries, and it’s not a small impact. There is particular interest in the real estate market, where developers and investors are facing the harsh challenges of volatile rates.
Here, we take a closer look at what these rates mean for businesses and navigate the current interest rate climate.
Understand Florida Commercial Financing
The Current Interest Rate Climate
For nearly two years now, we have seen numerous rate adjustments from the Federal Reserve. The rates have been consistently climbing, with more than 7 rate hikes since 2022. The rate hikes are typically incorporated to fight against inflation. Unfortunately for businesses, lenders, and consumers, this means that lending is far more expensive. Every rate hike raises the costs for each of these parties.
As interest rates rise, the cost of debt also rises. Borrowers will pay far more to repay their loans and may not be able to afford to borrow as much. At the same time, lenders are paying higher prices to be funded to provide for the loans. And then we have the consumers who are ultimately eating the increasing costs by paying a lot more for the goods, services, and real estate that they purchase.
Where Do Interest Rates Go From Here?
The unfortunate truth is that we simply don’t know what is going to continue to happen with interest rates in the future. We can certainly hope for decreases in rates and inflation, but there is no guarantee of that. The Federal Reserve has a stated plan that is designed to tighten monetary policy, which is where many of these hikes originated. At last check, there was still a lot of ground to cover to reach the final resting place.
Helpful Hints to Navigate the Current Markets
There is no easy answer or solution for the high-interest rates we are facing, particularly in the real estate market. While the experts continue to predict more spikes in the rates, there is also still demand for property and other investments or purchases. Those working in the Florida commercial financing industry understand more than ever the challenges the industry is facing.
There are some things investors, borrowers, and lenders can do to be proactive and help reduce the pressure on the markets. Here are a few helpful hints:
- Take advantage of low floating rates that will allow you to refinance at a later time when interest rates settle down
- Have current development financing re-underwritten for renewed stress testing data
- Consider available public financing options if your plans qualify for certain programs or options
- Look into economic development resources both locally and on a federal level
- Research mezzanine financing as a potential alternative
In the end, it is a waiting game. Even while interest rates are so unstable, we must continue to learn how to navigate the markets and do our best to work with what is available. Learn your resources, do your research, and do your best to make what is available work for your investment needs.
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