Today, rising interest rates and higher borrowing costs are presenting daunting challenges to businesses, leading to increased expenses and impacting profit margins. However, there are some strategies that businesses like yours can adopt to help stay competitive in the market and overcome today’s tough economic climate.

Improve cash flow

One of the primary ways businesses can stay competitive in the face of rising interest rates is by improving their cash flow management. This involves tracking income and expenses, forecasting cash flow, and reducing unnecessary expenses. By improving cash flow management, businesses can ensure that they have enough money on hand to pay their bills and meet their financial obligations, even as interest rates rise.

Reduce debt

Another strategy businesses can adopt is to reduce their debt load; mainly floating rate debt. As interest rates rise, so do the costs of servicing debt. By reducing their debt load, businesses can reduce their interest payments, which can free up more cash for investing in their business. This can also help businesses avoid the risk of defaulting on their debt obligations, which can have serious consequences for their credit rating and ability to borrow in the future.

Drive sales and revenue

Obviously, increasing sales and revenue can help offset the increased costs of borrowing and interest expenses – but that can be easier said than done. Businesses can work to increase sales by improving their marketing strategies, expanding their customer base, or introducing new products or services that appeal to a wider audience. By focusing on increasing sales, businesses can maintain their profit margins and stay competitive, even as interest rates rise.

Invest in employees and infrastructure

Finally, businesses can stay competitive by investing in their workforce and infrastructure. By improving their technology, equipment, and facilities, businesses can increase their productivity and efficiency, which can push up net income. Additionally, investing in employee training and development can help improve their skills and capabilities, which can also increase production, efficiency, and quality – leading to increased sales.

 

Get to know your banking team

Your banking team should be an incredibly beneficial partner. They can help provide you with competitive terms on loans, credit lines, and other financial products. They can also be a valuable resource when it comes to strategic planning for your business, providing insights into market trends, industry standards, and financial benchmarks that can help inform your business strategy.

Valley Bank can help you carefully assess your options and develop a strategy that is tailored to your business’s specific needs and circumstances.

 

For informational/educational purposes only.  The information in this content is not advice on legal, tax, investment, accounting, regulatory, technology or other matters.  You should always consult your own financial, legal, tax, accounting or similar advisors before making any financial or investment decisions, or entering into any agreement for Valley products or services.  Copyright © 2023 Valley National Bank. All Rights Reserved.