"Twenty twenty-two was the year that killed the science-fiction fallacy of modern monetary theory (MMT). Countries with monetary sovereignty like Japan or the UK found themselves in an unprecedented turmoil created by the illusion that rising deficit and debt would never cause significant problems. It only took a few rate hikes to dismantle the illusion of perennial money printing as the solution to everything."
Private lending for commercial capital continues unabated with remarkably stable rates which were higher than conventional rates before but the gap is closing fast. Why is that? You might think that rates from private lenders would also go up since the cost of capital from banks more than doubled last year but you would be wrong. The reason is simple:
Private lending rates have always been true reflection of supply & demand divided by risk - a true price discovery which has kept the cost of unsecured, commercial capital from private lenders in the 2-3 points per month range for years with little variation. Owners who use this capital know this to be true whether they are using revenue factors (cash advance) or LOC like what Bluevine, Kabbage & Fundbox used to do (and still do in some cases).
Business owners who have exclusively used conventional bank financing or SBA have been insulated from real market forces because the rates they've been paying have been heavily subsidized by the Government through the Fed printing money from nothing and flooding the banks with it to "stimulate" the economy.
They sure as heck stimulated it alright!
"Since when did money not have to be paid back? Who insisted that the more dollars the federal government printed, the more prosperity would follow? When did America embrace zero interest? Why do we believe $30 trillion in debt is no big deal?"
To best prepare for what's coming the first thing owners need to do is gain situational awareness, re-evaluate existing methods and keep lots of powder dry.
There are already visible signs all around us that are good indicators of where we are and what might happen next - the one I find most critical is the cost of home mortgages have taken a huge bite out of consumers budgets. Any businesses that rely on discretionary spending from home owners should pay attention to this!
"The average rate on a 30 year fixed-rate mortgage is more than twice as high as it was this time last year…Mortgage rates inched up again last week, after a slight increase the week before interrupted six straight weeks of falling rates.The 30-year fixed-rate mortgage averaged 6.48% in the week ending January 5, up from 6.42% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.22%"
Auto dealers are facing a crush of repossessions as car payments are between $600-$1000 now days for new or slightly used cars. It's a great time to be a repo agent though! If you're thinking about buying a new car soon you'll see some bargains shortly guaranteed!
Small business owners in general are under a lot of pressure as all the elements of their respective business models sustain one breakdown after another; wild swings in shipping costs, impossible to find/hold good workers, inflation degrades their earnings and supplies are sporadic. As if those challenges weren't already enough, they have big government up their derriere imposing onerous new restrictions on running a business because, you know, they like us so much!
"If the corporations wish to receive a loan, they have to accept these conditions. This is the latest attempt for total domination of the society. This does not need to be law, only an understanding among the financiers. Only large companies can afford the ESG system to research each product. It is another attempt to strangle small business. Small business is much more difficult to manipulate than global corporations and therefore should be eliminated according to our betters."
For now, private capital is available at pretty much the same cost as it was last year. name one other thing you can say that about.
Call me to talk about your project or your funding needs, I'm available full time and I always return calls!