How to finance in a rising rate environment


January 24, 2024

Illustration: solvod / iStock / Getty Images Plus / Getty Images

Illustration: solvod / iStock / Getty Images Plus / Getty Images

The financial landscape — with respect to bank loans, vehicle leases and working capital credit lines — is changing rapidly with the recent increase in interest rates.

As rates rise, banks may not be able to get out of certain commitments for lower rates they locked up in the past without recognizing significant losses.

As such, there may not be as much money at the banks to lend, which makes getting a loan more difficult. Compound that with the added risk lenders take on with higher interest rate loans and borrowers whose payments have increased significantly, and you have a
recipe for a much more restrictive loan environment.

While this can be daunting for individuals and businesses seeking bank financing, it doesn’t have to be a complete roadblock. By understanding the current climate and adjusting your approach, you can still secure the funding you need.
Understanding the landscape

There are three major factors contributing to this finance climate, specifically:

  • Higher rates. The Federal Reserve’s recent rate hikes are trickling down to banks, making borrowing more expensive. This means stricter lending criteria and potentially lower loan amounts.
  • Shifting priorities. Banks are becoming more cautious, prioritizing borrowers with stronger creditworthiness and stable financial histories.
  • Alternative options. While traditional loans may be more challenging, alternative financing avenues like U.S. Small Business Administration (SBA) loans and private funding might be worth exploring.

Navigating the maze

Image courtesy of Dan Gordon

Dan Gordon, CPA

Take this six-step approach for success:

1. Strengthen your credit. A good credit score is more critical than ever. Proactively address any outstanding debts and work toward improving your credit score.
2. Shop around. Don’t settle for the first offer. Compare rates and terms from different banks and explore options such as credit unions or online lenders.
3. Be prepared. Gather all necessary documentation, including financial statements and business plans, to demonstrate your creditworthiness and financial viability.
4. Focus on value. Clearly communicate how your project or business will generate revenue and create value for the bank.
5. Consider flexibility. Be open to exploring different loan structures, such as variable interest rates or shorter terms, to fit your current budget.
6. Seek professional guidance. Consult with a financial advisor or loan specialist to tailor your approach and navigate the complexities of the current financial landscape.

The rising interest rate environment presents challenges, but it also encourages responsible borrowing and financial prudence. By being prepared, flexible and proactive, you can still secure the financing you need to achieve your goals. Remember, a well-structured loan can still be a valuable tool for growth, even in a rising rate environment.

3 tips for better financing

Take action to improve the likelihood of obtaining the financing you need.

  • Network. Build relationships with bankers and loan officers to increase your chances of approval.
  • Negotiate. Don’t be afraid to negotiate terms and interest rates.
  • Stay informed. Keep yourself updated on the latest economic trends, and adjust your financial strategies accordingly. — DG

About the Author

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Dan Gordon, CPA, owns PCO Bookkeepers & M&A Specialists, an accounting and exit planning firm that caters to pest management professionals throughout the United States. He can be reached at

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