Hello Business Owners and Friends!
The US Federal Reserve has announced another interest rate hike to combat the relentless inflation. It announced yesterday that the Fed reserve rates would be raised by 75-basis points. This is a tremendous trigger for the entire world to increase their cost of funds. With the rising cost of living already taking a toll on consumers early this year, the return of rising rates will create a new form of obstacle for businesses and financial institutions.
What does the federal funds rate mean to you?
The federal funds rate, which is regulated by the US central bank, is the interest rate at which banks borrow and lend to one another overnight. Although consumers do not pay this rate, the Fed’s actions have an effect on the borrowing and saving rates we see everyday.
On the flip side, higher interest rates also mean savers will earn more money on their deposits as the deposit rates will also increase. That is why our Singapore Savings Bonds rate has increased (recently went up to 3% p.a. on average)
My opinion on the above:
As the Fed Reserve Rate increased, this is only the first tranche of hikes, more rounds of increases will be applied in the future. We should be prepared for even higher interest rates in the coming months.
Traders also expect that the Fed will raise rates again at its next meeting in September, then again in November and December before possibly lowering rates in the middle of next year, depending on the evolving economic conditions.
Therefore, there is no point in waiting for the interest rates to fall because it will not happen anytime soon.
Before I continue, let me give you an overview of the business loan environment in Singapore.
Personal experience over the past few days:
Yesterday, a couple of bankers from a local bank came to my office to share with me a potential interest rate hike next month. I was surprised to hear that the interest rate for the Temporary Bridging Loan may take place in “AUGUST 2022!”, which is next week!
Yes you didn’t see wrongly, it’s August 2022. I thought it would only increase after the Temporary Bridging Loan expired on 30th September 2022, and transit to Working Capital Loan; but now we are talking about the Temporary Bridging Loan increasing to a higher rate next month.
I was quite shocked at how quick this has arrived, and how many of my clients had little time to react to it. As compared to the current rate, the rise is relatively large (almost 50% increase).
I am not sure if this is simply a speculation or if the bank would actually raise the interest rates so soon. However, if the growing rate really happens, the cost of borrowing will increase tremendously, and future loan rates for Working Capital Loans after September and the Business Term Loans will increase even further.
Earlier today, I got another loan approved for my client who has already maxed out their TBL limit of $1million. They managed to get a $250k Working Capital loan at 6% p.a. and $250k business term loan at 8.88% p.a from a reputable bank. So this is the interest rate that banks are currently offering. This week, we will be signing the Letter of offer.
As we all know, the bank has the absolute right to adjust its interest rates at any time. Hence, if you have plans to take on more loans for projects, cashflow, or have any plans for cash in the near future, this is your LAST CHANCE to get a loan at a decent rate, which is still at 4.75% to 5% p.a.
Also, due to the anticipated high volume of applications, our banking partners have informed us that the deadline for new applications for the Temporary Bridging Loan is on 31st August 2022. As the bank and ESG requires a longer processing time to approve any rates or loan packages, if you submit the application after 31st August, it will be classified it as a Working Capital Loan, and the interest rate will be higher.
Therefore, although the news or website indicates the deadline as 30th September 2022, it is not the case.
At the end of the day, Bizsquare has been around for the last 9 years and has received numerous recognition and awards. People who know me well will know that I am more interested in marketing and media content work than in business loan consulting. So this email is not so much about making money for me, but more for your business cost.
Here are some photos of our recent influencer marketing work:
Influencer Collaboration with Zermatt Neo:
Influencer Collaboration with Jeff Ng:
However, I feel that if I do not inform all of my friends and clients about the impact of the business loan rate hike today, I will regret one day.
Cheers and all the best to your business!
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BizSquare is a one-stop business consultancy firm providing Loan Consultancy Services, Accounting and Corporate Secretarial Services, Branding and Marketing Consultancy, Strategy Management and Start-up Mentorship.
For more info, please visit Bizsquare Group at www.bizsquare.com.sg