Rohit Arora’s Post

Transcript

I think the biggest reason why the Fed has cut the interest rates is that overall the inflation numbers look better. And obviously there was a lot of expectation in the markets that Fed will come up with this interest rate cut, which they did. The job reports was also pretty weak, you know, so that also helped them, you know, to justify this rate cut right now. I think the biggest difference is obviously going to be in cost of funding for small businesses because unlike mortgages and other lending products, small business lending is directly correlated to the Fed interest rates. So obviously this is good news for them. Their loans will get cheaper, especially SBA loans and lines of credit. That also means that overall interest burden that they have been bearing for last two years will also go down and obviously a lot of that interest burden cut has been front loaded. With 75 B Scott for this, 25 bips clearly means that now we have 100 bips of cut, which is pretty significant if I see from September onwards, you know? I think the plans for 2025 depends on two or three things. Obviously with Trump administration coming in, which is much more business friendly. So we have seen there has been a big spike in the confidence of small businesses in the country. Having said that, inflation is still a challenge, you know, as we saw today also in Feds chair, you know, remarks that in 2025 Fed doesn't have room to cut rates that easily, you know, because we have seen inflation. Pain started to go up. I think having said that, the confidence in the country is at a record level, you know, So I think that should help overall. I think the other thing also we'll have to see as a small business owner what they have to plan is that how the first half of 2025 pans out because. Looking from the data and looking from expectation, I think initial part of 2025 could be pretty tough to start with, but then nothing should get better in the in the latter half of the year. One thing is if they're looking to borrow money, then then it's a better time than anytime in the last 2 1/2 years. If they are looking to expand their business, they see a big opportunity. Let's say if they see an opportunity to buy a good business right now, you know, or add some new. Apps to into their existing business then it's a good time to do that. Having said that, still keep an eye on your fixed cost because variable costs are easy to adjust. Fixed cost gets very tough to readjust and the other thing is you know, look to build a business which is more efficient in out there. So two things that obviously one thing they should ask the CPA is that what kind of savings they will have with the lower interest rate even on their existing, you know, loans. How does it help them to qualify for, you know, even more amount if they need because the debt service coverage ratio should get better. Secondly, they should also sit down with their CPS to see that what their industry outlook is. So if you're in construction industry, lower interest rate means more construction activity, oil prices coming down. With geopolitical issues getting sorted out in 2025 will mean for a lot of businesses in transportation and logistics, a lower input cost, which is again a good thing to have happened. And I think the other thing is just like. Plan for 2025.