Interest rates were expected to possibly move in 2019, like they did at the end of 2018. Now, that appears to be on hold, de facto, by the man in charge of hikes or drops. Federal Reserve Chair Jerome Powell’s initial comments on the possibility of movement in the interest rates occurred last week. Following the conclusion of a recent multi-day meeting with the Fed, Powell implied that there would be no more interest-rate hikes in 2019 and that the U.S. economy’s growth was solid. This has sent ripples through the economy and businesses of every level, leading to a few important things to note for the lower middle market.
Banks use the federal funds interest rate as a base to determine the starting point of their own short-term interest rates. When it comes to their best customers, banks charge them the prime rate, which is also based on the federal funds rate. This means that the rates that small businesses would seek out from bank loan are directly affected by the Fed. No interest rate increases mean that the Fed is prepared to continue to grow without the need raise percentages on returns.
This is a good thing for small business because of two major factors: confidence and deal making. The signal to halt interest rate increases is a positive one for confidence indexes. The Conference Board’s U.S. leading economic indicator, or LEI, index was +0.2% on a month-over-month basis in February with expectations set for +0.1%. This was a great sign following no change in January, -0.1% in December, no change in November, and -0.1% in October. Fears of a recession have stalled a bit as well as more small business owners in the lower middle market see growth continuing, meaning more room to expand, hire, and continue a period of positive news on the global economy. If a big move is in your future following interest rate news that came last week, reach out to the experts in the market.
SA Capital Partners is a key tool for lower middle market business owners for their expertise in the industry. Whether a merger or acquisition is in the cards, or possibly a sale of your business given the healthy market, let the team at SA Capital Partners be your guide to a profitable 2019.
About SA Capital Partners:
SA Capital Partners is an innovative financial services firm that specializes in mergers & acquisitions advisory and capital raising for lower middle market businesses. We aspire to give all the tools necessary to complete any transaction. SA Capital Partner’s financial services industry specialists provide comprehensive, integrated solutions to banking transactions. Our breadth of services and industry knowledge allow us to understand each client’s unique business needs. Our goal is to make all financial services available to every small business.