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What will record low interest rates mean for your business?

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On 19 March 2020, the Reserve Bank of Australia cut official interest rates to a record low of 0.25% to encourage active spending and keep the Australian economy afloat.

Amidst Australia’s softening economy and the impacts of the coronavirus pandemic, the RBA is also offering banks at least $90 billion at 0.25% over three years to banks if they lend that cash to small and medium-sized businesses. In a time of nationwide low-interest rates, there are many options available to your business. Here are three:

 

Take out new loans:

If you require a new loan, businesses are being encouraged to take out loans from not only large banks but also smaller competitors in the online business lending sector. With interest rates at comparatively low levels, now is the most opportunistic time to take out a loan and invest in any business opportunities you have been eyeing. Due to the coronavirus pandemic, small businesses will be able to access a six-month deferral of all loan repayments.

 

Refinance outstanding loans:

Refinancing is the replacement of an existing debt obligation with another debt obligation under different terms. Although interest rates are at an all-time low across all lenders, there are still differences in deals amongst competitive lenders. Consider researching cheaper options for loans while also taking into account prices to exit old loans to help you save some money.

Using high-yield accounts:

When interest rates are low, there is also the opportunity to take any available cash profits your business generates and place them in high-yield accounts. High-yield accounts are those that pay typically up to 25 times the national average of a savings account and thus your saving rate may skyrocket during times of low-interest rates.

While there are many options available for businesses during sustained periods of low-interest rates, it is still important to consider the specific circumstances of your business and if investing in new opportunities is a good decision in the context of Australia’s softening economy.

Speak to your business adviser to find out what the best option may be for your specific business requirements, and if you need any finance Crosbie Finance is able to assist you to find the best deal.

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Specialist accounting and business advice, knowledge and experience for businesses and professionals.

Newcastle

Level 5, 12 Stewart Avenue, Newcastle West NSW 2302

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