The prime rate is a benchmark for many types of loans, including mortgages and credit cards; it rose from 3.75% to 4% following the Federal Reserve"s rate hike . The Federal Reserve anticipates two more interest increases this year.
If you have outstanding debt on which the interest rate is variable, such as a line of credit that you"ve drawn upon or outstanding business credit card debt, your repayment costs increase in tandem with rate hikes. This requires more money to repay your loans . Take the additional interest costs into account in your cash flow projections.Because customers are paying higher interest rates on their credit card debt, they may be less able to spend as they have previously done. The cost of servicing their debt may supplant spending money with you.

Of course, the rate hike has been modest, so the impact on sales may not be dramatic. But even a small decline can hit your sales revenue. Be sensitive to the buying power of your customers, especially as additional rate hikes come to pass.

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