Small businesses seeking fresh capital are likely to be big beneficiaries of the Federal Reserve’s announcement Wednesday that it’s cutting interest rates.
The September 18 announcement by the Fed that it would lower rates by 0.5% is great news for small businesses, said Brock Blake, founder and CEO of online small-business lending marketplace Lendio.
“It feels like a sigh of relief and a loosening from lending institutions to start lending again,” Blake said in an interview. “I think it’s as much about the mindset and the optimism that is attached to it as it is the actual rate cut.”
Even before the rate cut was announced, application volume this month at Lendio was up 15%, Blake said, as many businesses anticipated the Fed would lower rates amidst a cooling labor market and slowing economy. Business loans are not tied as closely to interest rates as mortgage rates are, but lowering the rate can drop the cost of variable-rate loans and entice business owners sitting on the sidelines to start expanding their businesses again.
