Yes You Should Still Borrow In a Higher Rate Environment

By | July 13, 2022

I had an interesting conversation right after the “big” June rate hike. 

A customer was in the process of buying a new machine they needed, and the rate hike happened right in the middle of their “which of these two models should we buy?” discussion. And since like most businesses they were going to finance the machine, they briefly discussed not going through with the purchase.

loans for equipment now?

The interesting part was it wasn’t the actual rate itself that caused them to consider bailing (even with the hike, rates are still historically low) – it was the fact that since they (in their words) dragged their feet on picking a model, they “lost”. Had they decided just a week earlier, they would have gotten a lower rate.

They decided they still really needed the equipment, so they went through with it. But in talking about this, I made them feel better by telling them rates were almost certain to rise again and again, well into the next year or more. So looking at it THAT way, well, they locked in before more increases.

That means they actually won. Imagine that? 

Look, I know I’m in equipment financing, and I’m going to be bullish on financing no matter what. But I bristle at a reluctance to finance because of emotional reasons like “oh, we could have paid less had we done this last week”. To me, that’s silly. 

This is because while the “we could have paid less last week” is technically true, it’s a blip in the overall success of a business. If you need the equipment, you need the equipment, and that should come first. As I mentioned in another post, people and companies still need things done. Are you planning on doing them, or not?  

I’m not telling you everything is rosy and not to pay attention to rates. If you are thinking about an equipment purchase, you’d be wise to do it before the next Fed meeting (July 26-27), or definitely before September’s (September 20-21).

But if you need equipment after that, don’t sweat it. You’re still going to lock in before rates go up more. Plus, you are going to get equipment that matters to your business. And that’s a win anytime! 

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