Business Finances Rest As Bank Holds off on Interest Rate Rise

10th May 2018.

The Bank of England has said the UK economy has hit a “temporary soft patch” as it kept interest rates on hold at 0.5%.

While the Bank debated the issue of increased interest rates, British businesses patiently held their breath. High-interest rates can be a severe disruption to the stride of the business landscape, and many small business owners struggle to pursue investment or expansion when borrowing fees are increased beyond their budget. For the time being, business has been afforded some respite as the expected interest rate hike this month has been delayed.

Business finances have been hit hard by various political and economic downturns, but this recent spout of good news could point them in the right direction. Though the Bank decided against rising rates this month, they will still be raised in the foreseeable future and businesses should take the necessary precautions. Before the pressure is mounted on them by the Bank, individuals and businesses should stop relying on traditional lenders to fund expansion projects. There are other avenues to explore, which do not involve relying on financial institutions who have a dubious financial history themselves.

At the Credit Protection Association, our debt recovery services free up cash flow and allow our members to afford new equipment and machinery, as well as build up their workforce and list of services. Unlike banks, our members do not borrow money but instead merely see the money they are owed, recovered.

The Bank of England has said that the cut in growth is almost entirely due to the disruption to the economy caused by bad weather in March.

The Bank expects the economy to rebound in the coming months when it will be expected to follow through with the rates rise.

The financial markets are now indicating there will be an interest rate increase towards the end of the year followed by another in 2019, and a further one in 2020.

Movements in the Bank’s official rates can have big effects on UK households. A rise would mean that about four million households with variable or tracker rate mortgages would see an increase in their monthly payments, while an increase would benefit the nation’s 45 million savers.

“It looks like the 2018 rate hike has been delayed not cancelled,” Fitch Ratings chief economist Brian Coulton urged.

The last month has been anxiety-driven for small businesses, with interest rates balanced on the cliff edge. Business finances have been given some relief as the Bank postpones the increase, but businesses should perceive this as the motivator for a shift in procedure. Rather than seeking business growth through bank loans and exploitative lending fees, the rise of alternative finance has created more options.

While technology-based finance avenues such as crowdfunding and peer-to-peer lending are popular, in this shaky economic climate businesses should strive to improve their finances rather risk further damage.

At the Credit Protection Association, our debt recovery services chase down unpaid invoices and residual debt, to not only award our members with extra cash but purge their finances of unnecessary clutter. Our credit checks and company directories also protect our members from late payers and the inevitable future interest rate hike.