Rising Interest Rates: Get Financing Now and Save
After more than three years of historically low-interest rates, the Federal Reserve plans to raise interest rates during the next year and a half. Projections indicate three interest-rate hikes in 2022 and three more in 2023. Time is of the essence if you are looking to purchase a new truck(s) or commercial equipment. Higher interest rates filter into the economy at a slower pace. It may take several months to see the effects of the rate hike.
Since interest rates will only go higher in the months ahead, there is no better time to buy a new truck or equipment than right now. Contact Commercial Fleet Financing today to get the lowest possible monthly payment on your next truck, trailer, or commercial equipment before interest rates increase.
The Economic Forecast
Like other industries, the equipment finance industry closely follows the business cycle. In March 2022, the Federal Reserve approved its first interest rate spike in more than three years, a critical move to address spiraling inflation. For nearly a decade, the economy has seen low inflation, low-interest rates, low market volatility, and modest to moderate economic growth.
The reasons behind the rate hike include:
• Inflation readings hit a 40-year high.
• The labor market is strong.
• The economy is more stable as compared to how it was in March 2020.
The main points to know about the rate increase include:
• In March 2022, the Federal Reserve approved a 0.25 percentage point rate hike, the first increase since December 2018.
• Officials indicated an aggressive path ahead, with rate rises coming at each of the remaining six meetings in 2022, pointing to a consensus funds rate of 1.9% by year’s end.
• The bank said they would raise rates four more times in 2023, resulting in a 2.8% fed funds rate at the end of that year.
• Members also pared expectations for economic growth this year and sharply raised their outlook for inflation.
With the rebound following a recession, the economy is flourishing. Job growth is strong. With more workers in the market, wage pressures build, and inflation rises. Though a moderate amount of inflation is good for the economy, issues can develop if inflation rises too quickly or unpredictably. In that case, it can be complex for lenders to price deals profitably. As inflationary pressures in the economy build, the Federal Reserve typically responds by increasing the federal funds rate.
Getting the Best Financing Rates Means Getting Started Now
Trucking company owners know that having access to capital is as important as attaining financing at low-interest rates. With inflation reaching 7.5% over the past year, the Federal Reserve is likely to get even more aggressive in raising interest rates in 2022.
Higher interest rates can negatively affect your business and growth, so don’t wait. Follow two easy steps to get started for financing up to $250,000.
1. Fill out a one-page application for a pre-approval.
2. Provide an invoice or bill of sale.
To get approved for a loan over $250,000, you will need the following:
• Last three months of bank statements
• Last two years of financial statements
• Last two years of tax returns
Why Time in Business is Important for Securing a Loan
It is standard procedure for every lender to ask how long you have operated your business. The longer you’ve been in business, the better it is for your application because it shows a lender that your business is financially sound and has had long-term success.
Qualified trucking business owners who have operated their businesses for more than two years have a more substantial chance of being approved for business loans. At the two-year plus mark, business owners have already achieved some forward momentum in their business, and they can take on more debt obligations. If business owners have been in business less than two years, they may be declined for a business loan due to time in business (TIB). So, time in business becomes vital for qualifying for and securing a good loan.
Two years in business enables you to qualify for a 6 to 8% rate, also based on a good credit score. If you have a lower credit score, count on making a down payment toward a new or used truck. Most lenders will also want to know if you are a homeowner. This knowledge provides a comfort level to underwriters and adds another layer of protection.
Commercial Fleet Financing’s ideal customer profile has at least five years TIB, primarily due to the abundance of financing options available for the customer, including low rates, great terms, and no money down financing.
Other Options: Find Out About Leasing to Save Cash
With the cost of borrowing increasing with each Federal Reserve rate increase, leasing the equipment your business needs may be a smart option. Leasing equipment means no down payment, leaving more cash available to put aside for other business priorities or investment options. Leasing requires smaller monthly payments to protect your cash flow if your money borrowed with a variable rate of interest becomes more costly. If leasing interests you, talk to an expert at Commercial Fleet Financing to get more information.
Act Now Before Rates Climb
If you anticipate needing funding to buy a truck(s) or commercial equipment over the next few months, you should ask about Commercial Fleet Financing’s approval process as soon as possible to get the best rates.
If the Fed raises rates by 2% or more over the year, as some experts predict, rates on commercial financing could skyrocket. If you wait six months before you get your funding, you could have thousands of dollars of extra interest expense this year (which can be avoided if you respond now). With more meetings planned in the coming months to raise rates, the sooner you make a move, the better.
Act now if you want to purchase a truck or commercial equipment before interest rates rise. Contact Commercial Fleet Financing to get pre-approved today!
About Commercial Fleet Financing, Inc.:
At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with credit approval in as little as two hours, CFF’s phone number is (469) 281-2962.