As of late February, the 10-year Treasury note hit a new high bringing the long-term debt market to a place of relative stability. This is great news for economic recovery as it shows an economic balance not seen since the pandemic’s onset. While that brings with it great optimism, what does this mean for small businesses?
Unfortunately, a shift in higher yields from bonds indicates that banks will soon begin to increase the cost of borrowing. This has a direct and immediate impact on small businesses that continue to recover more slowly from the economic turmoil of the last year. This is a matter of basic economic cause and effect but one in which the impact could become significant for borrowers over the next six to eight months, the ideal time of recovery.
The challenge here is that many small businesses, including many distributors in our industry, are looking to specific recovery milestones in 2021. The first being the PPP loan rule changes, which continue to occur, the next is the still-pending relief package, and another would be maintained low-interest rates to help overcome a final hurdle and get back to a relatively normal state of operations. It is in that final scenario which there appears to be some concern.
Bond yields are great for those that wish to attach their financial investments to something with less overall volatility, like banks. But that will result in banks being able to raise interest rates for the first time in a while. Even the news of the Federal Reserve potentially raising interest rates based on this same yield benchmark has sent stocks into a frenzy.
So, what does this mean for you? 2021 must be a year of recovery. It is going to be marked as a comeback for many. But if there is a plan to borrow in the near future, it is necessary to ensure that this plan does not further hinder your business’ growth. Order financing is one of the most core components of developing operational success in this time of economic recovery. Financing through ACS Affiliate Services is thoughtfully designed to allow businesses to protect their assets against market volatility.
This is the time to plan your roadmap of recovery and success. As economic equilibrium continues to develop at the macro level, those on the individual and small business level can expect a more difficult recovery. Your business should not just work to maintain, it should grow. A partnership with ACS is designed to achieve just that.