Interest Rates in the COVID and Post-COVID World

One of the questions I get nearly every single day at the beginning of every new year is “What does the loan market have in store for us for the coming year”? With the events of 2020 this question takes on even more importance to our affiliates.

Based on our market research and the feedback we get from our lender network we believe interest rates will remain at or near historic lows for the foreseeable future. The results of the January meeting of the Federal Reserve indicate no plans to raise rates until the economy has achieved maximum employment. The Fed doesn’t expect those numbers to be achieved until 2023 at the earliest. This means we can expect interest rates to remain low for the next three years. That’s great news for Business Finance Consultants! Low rates not only make it easier for borrowers to qualify for financing but also allows people to borrow more money than in high interest rate environments.

The fourth quarter of 2020 show a significant number of both bank and non-bank lenders starting to ease their credit standards. This is mainly the result of lenders having two full quarters of historical income through the pandemic which is allowing them to make better forecasts for 2021. While most commercial banks have indicated that their credit standards will be mostly remaining the same in 2021, over 45% of non-bank lenders are much more optimistic. They expect to ease their lending standards over the coming year.

This optimism by lenders coupled with the fact that 60% of small business owners view the outlook of the US economy to be more favorable in 2021. A recent study also showed that 67% of the small
business owners surveyed expect their business to return to pre-Covid volume and revenue.

Now is the time for BFC’s to strengthen existing relationships and develop new ones. and help your clients plan for the future with the knowledge that the stability of near term rates is going to be working in their favor.
Some industries were especially hard hit. Any business that has connections to the travel, hospitality and restaurant industries is going to face challenges in the coming year. For a lot of these deals there is not going to be a one step solution. It is going to involve an initial short term finance product in order to bridge to the time when stability has been achieved and lender confidence in those industries has been reestablished. The good news here is that with the extended forecast of continued low rates your client will still be able to take advantage of a favorable market.

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