How Will Rising Interest Rates Affect Selling a Business?
On December 14th, we saw the second Federal Reserve rate hike in a decade, an increase from 0.5 percent to 0.75 percent. And while this is a small increase, it’s a taste of what is to come as Federal Reserve officials say they expect to have additional hikes in 2017, 2018, and 2019. As these rates climb and climb, once great-looking loans start to lose their appeal, which could mean trouble for your exit plan for selling your business. Learn how rising interest rate affect selling a business in the next few years, and how the clock is ticking on getting ready to sell.
Costlier Loans Make for Fewer Buyers
As a business owner, do you know how much your business is worth? If you’ve properly assessed its potential, then you know how critical business loans are to the buying process. As the price of these loans increases through Fed interest rate hikes, doors will close for some buyers and businesses as the scales tip for the cost-benefit analysis from buying your company to passing it over. Over the next few years, business acquisitions could go down as affordable financing options start to dwindle.
Getting a Head Start on the Interest Rate Hike
If the rising interest rates are a door closing on your selling prospects, it’s time to get your exit plan into effect. The most important part is getting started early: getting a business properly on the market, finding a buyer, and going through due diligence and final agreements all take time. That’s what you’re racing against as loan rates increase. A good plan can take a year to get into place, so it’s important to start exploring what you need to do to get your business ready as soon as possible.
Let George & Company help assemble the team needed to sell your business. We’ll work with you to perform the valuation for your business, help you get your business ready for the market, and help provide financial options to both you and your buyer, from bank loans to full escrow service. With over 35 years in the business brokerage and M&A industry, we can help you find the right buyer before interest rates become a factor. Contact us today.