Eyal Lifshitz is CEO of Bluevine, a leading provider of small-business banking.
In September, the Fed announced its decision to cut rates, with a second cut following on November 7. Since then, a frenzy of attention and wild speculation has followed. Everyone has suddenly become an armchair economist—overanalyzing every move and historical pattern, with social media continuing to treat the economic landscape much like a spectator sport.
It’s easy to get caught up in the noise. Some small-business owners might feel the need to move faster, hire more aggressively and raise more capital. But the recent cuts shouldn’t be an all-consuming focus. To be clear, the Fed’s decisions are important economic indicators, but they are small signals in a far more complex landscape—not necessarily a direct guide for what your business should do next. Rather than hyper-focusing on rates, SMBs should consider their unique market, industry dynamics and financial health—building resilience through flexible strategies that can thrive, regardless of where rates land.
Here are a few things SMB owners should keep in mind in light of the Fed’s recent moves:
Evaluate your own circumstances.
No talking head on business news media is more of an expert in your business than you are.
Imagine you’re the owner of a cheese shop in Cleveland. You’ve been debating the idea of opening a second location for months, and when news of the first rate cut hit, you decided to take the plunge. The only problem is you didn’t take into consideration other players around the new location, and now your new shop is three blocks away from a beloved neighborhood favorite. That’s a far greater threat to your business than missing out on a slightly more favorable loan.
Take a deep breath.
No one operates in a vacuum dictated by interest rates alone. What’s much more important is your own market, your own operating context and your business’s financial health. Your strategy should be grounded in your reality—not the economic headlines of the day.
Let’s say you own a dry-cleaning business in Charlotte, North Carolina. While your television screens might be full of pundits debating the implications of a rate cut, you should be paying much more attention to local factors. For example, more companies are now calling for employees to be in the office. With that will come more opportunities for people to get dressed up. That’s going to be much more relevant to you than anything the Fed does.
Avoid getting locked into long-term capital with fixed rates.
Think of interest rates as the cost of borrowing money; when they’re lower, the cost of taking out a loan gets cheaper. Sure, rates are down now, but they could go even lower. Locking into long-term loans with fixed rates in today’s environment could cost small-business owners thousands in the long run.
An alternative move is to look for loans that offer more flexible rates or an option to pay them off sooner, keeping your options open. Flexibility is your best friend. You want the ability to stay nimble for whatever curveballs the economy throws your way.
Put excess capital to work.
If you’ve got more cash on hand than you need right now, don’t just let it sit there gathering dust in a standard account. When rates are dropping, it’s that much more important to make sure you’re maximizing the earning potential of every dollar. High-yield savings or Treasury accounts can maximize returns and make your money work harder—without sacrificing any easy access as you can usually cash out without penalties.
Maintain financial flexibility.
Maintaining agility is mission-critical for small businesses. Agility is key, especially as the market settles around the Fed’s latest cut. You need to be able to pivot and make the best decisions for yourself, your employees and your customers.
It’s always important to pay attention to economic extremes, but they’re really just one piece of a much larger puzzle. And frankly, small-business owners have a lot to feel positive about during the last quarter of the year. According to a recent survey Bluevine conducted of small-business owners, they’re remaining bullish on their own businesses, with 88% reporting that they met or exceeded their expectations in the first half of the year and 73% entering the latter half of the year with even greater confidence.
Broad signals like these are just signals; they’re not going to magically transform your business. The Fed will do what the Fed does, but instead of hanging on every word from Washington, your time is best spent focusing on what truly matters: what you can control, your customers and your business.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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