The end of "easy money" (low cost debt)

investor profile

March 20, 2023

by an investor from University of Minnesota - Carlson School of Management in Minneapolis, MN, USA

Another week begins and another (potential) interest rate increase is on the horizon...

How are you adjusting your acquisition financing strategy to address the increased rates? More equity?

#debt
#equity

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commentor profile
Reply by an investor
from Western Washington University in Key West, FL 33040, USA
Pretty much every 6 months there has been a post on here about "How are you responding to the current bad environment, bad outlook, impending recession, etc." Yet I'm also quite sure there are plenty of searchers who have gone out and bought a good business at a fair price despite an uncertain environment and are now generating real wealth for themselves and their investors. The point is, don't get caught up in all of the crazy things happening in the world. There are always crazy things happening in the world. Focus on what you can control. Find a good business, don't overpay, structure it conservatively, and get to work. You can't get ahead if you're sitting on the sidelines. At some point you just have to get in the game. https://www.searchfunder.com/post/investor-thoughts-for-searchers-in-todays-economy
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Reply by a lender
from Trinity College Connecticut in Boston, MA, USA
Most SBA loans are variable rates, which clearly hurts Debt Service Coverage Ratios (DSCR) and should eventually cause sale prices to drop, but we know that prices are sticky downward. That said, some SBA lenders are now offering Fixed Rates for business acquisitions and business owner-occupied real estate, which can help limit the interest rate impact on getting a deal done. If you'd like to discuss in more detail, I'm available at###-###-#### or redacted
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