Girvan Gault, Finance and Banking Consultant, Pinnacle Growth Group, commenting on the announcement of the interest rate increase, said: “The announcement of an interest base rate rise today to 1.75% will add significantly to the challenges faced by NI businesses. With uncertainty around fuel prices, inflation forecast to hit 13% later this year and the prospect of further interest rate rises, it has never been more important for SMEs to understand the impact on their business and plan ahead accordingly. Not only could this immediately impact on free cashflow, it will also impact on how businesses can invest going forward.
“For local businesses, the most obvious impact of the increase will be on the cost of borrowing both for existing and future funding, however, there are steps that they can take to mitigate this and other effects. Business owners should quickly re-forecast cashflows and seek to fully understand the effect that increased loan repayments and interest costs will have on available cash and ultimately profitability.
“Future investment plans which are underpinned by borrowing should also be reviewed. Businesses need to closely scrutinise their cost base, particularly when they are unable to pass increased costs of borrowing onto their customers. Proactive management of creditor and debtor books is vital, especially if their debtor book is essentially supported by bank funding.
“It is important to be fully engaged with your banking partner, it is also paramount that you seek proactive, dedicated relationship management and value for money from your bank.
“The main advice is to quickly take stock of how the interest rate will impact your business and to take action. Most businesses in NI can continue to thrive and grow during this difficult time by seeking expert advice and putting the right plan in place.”/6/