Economic Cycle

Interest rates are generally a function of where we are at in our economic cycle.  Good news, bad news, recessions and bull markets all have an effect on interest rates. Short term rates are much easier to predict than long term rates because it is much easier for me to tell you what the weather will be like in an hour versus what the weather will be in a week. If it’s cloudy outside, it is likely to rain! The same goes for interest rates.

The short term interest rate, which is what most people know as prime rate, is set by the federal reserve. The fed tends to shift rates in whichever direction they feel will benefit the economy the most. When things are bad, they may bring rates down to encourage borrowing and the flow of money. When things are good, they may increase rates to hedge off inflation.

These factors will all have an effect on what interest rate your business will receive when it comes time to lease or finance your equipment. It’s best to always borrow when rates are low, but it won’t always work in your favor. Unfortunately, this is one thing that we cannot control and your business is likely to borrow at whatever the market dictates.