There is a lot of uncertainty in the capital markets. Everyone from Economist, Federal Reserve, European and World Bank leaders are sending mixed signals regarding inflation, interest rate hikes and the like. Bottom line, we know something is going to happen! Some is good for borrowers, and some is bad. Let’s start with the bad!

If interest rates rise that means it will cost the borrower more money to secure funds. This is referred to as the cost of funds (the amount it costs to borrow funds. i.e. at 10% annual rate: $10,000 borrowed at 10% = $1,000 cost to borrow $10,000). The higher the interest rate the more profit margin you need to have in order to pay the cost of funds and have money left over to fund operations and profits.

Now the good news! Inflation is a borrowers’ friend. Because inflation is a decrease in the buying power of the dollar. This means because prices rise it will take more dollars to buy the item. i.e. gas: your tank takes 15 gallons, at $2.00 per gallon it cost $30.00 to fill your tank, however; if inflation takes gas prices to $3.00, it will take $45.00 to fill your tank.

<strong>How does this help the borrower?</strong>

If you borrow $100,000 at 5% annually and inflation rises to 20% per year you will see 15% of your debt paid off each year for free ( cf. ‘<a href="http://beginnersinvest.about.com/od/inflationrate/a/What-Are-The-Effects-Of-Inflation.htm" target="_blank">What are the effects of Inflation</a>’)

So regardless of what the future holds, now is in the best interest of borrowers to secure the funding they need.

Altima Funding Solutions specializes in securing the right capital for businesses to ensure low cost of funds, ideal terms and conditions. Contact us now to discuss your funding needs at 602-773-1488 or <a href="mailto:deals@altimabusinesssolutions.com">deals@altimabusinesssolutions.com</a>.

Simply submit some basic information about your business by clicking the button below and one of Altima Funding Specialists will contact you within 8 business hours.

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Author: André Wilson ‘The Money Man’ | Altima Funding Solutions, Smarter, Better Funding Solutions!

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