Inflation and interest rate hikes can have a major impact on your small business. Read these tips for protecting your business finances in a challenging economic environment.

The Federal Open Market Committee (FOMC) increased rates a quarter/point from 0.25 percent to 0.5 percent in March—the first time since 2018—and is expected to raise short-term rates more this year. Russia’s invasion of Ukraine is also causing tremendous human and economic hardship, worsening upward pressure on inflation in the U.S. With rates on the rise and growing costs of supplies and services, what does this mean for small business owners?

Rates on interest rate hikes could fuel more costly borrowing, greater credit card costs, and changes to consumer spending habits—all of which can impact a small business owner’s bottom line. To get prepared, here are a few tips for small business owners in a rising-rate environment:

  • Connect with a small business banker. There’s no reason to navigate this changing environment alone. A small business banker can help you understand your options based on your particular business and needs.
  • Know your financial health. Because most small businesses are private, understating their solvency and long-term viability will take some examination. The good news is that there are some established ways to measure financial health. Understanding your balance sheet, income statement, and cash flow is a great place to start.
  • “Pressure check” your business. What if rates continue to rise? Are you able to cover your credit and loan obligations if payments rise, too? Running through scenarios to ensure your business can weather any sort of change is always a good idea.
  • Review any variable-rate loans you may have. If you have any adjustable-rate loans, they will go up based on the recent actions from the Fed. Consider shifting your adjustable-rate loan to a fixed-rate product so that any future Fed rate changes no longer impact the cost of your borrowing.
  • Create a plan to pay down your high-interest debt. Credit cards are the first to rise when rates climb, so sit down and create a plan to tackle paying off this debt as soon as possible.

inflation hits 40-year high

Small business owners are also grappling with rising costs due to growing inflation. According to the latest National Federation of Independent Business (NFIB) survey, 22 percent of owners reported that inflation was their single most important business problem. While many owners are raising their prices to deal with inflation, here are a few other tips to help offset these challenges:

  • Dust off your emergency plan. Now is a great time to run through “what if” scenarios and see if your business is ready. What if your supplies continue to rise? What if consumer spending changes and your business is impacted? What if your landlord, who is feeling the same pressures, raises your rent? It’ll be impossible to run through all potential scenarios, but think through those that could have the largest impact to your business and make sure you’re prepared.
  • Become leaner. Cutting staff, product offerings, or hours is never easy, but temporarily this may be an option until the issues stemming from rising inflation can cool down a bit. Look at your overall business and see if there are any areas that can take a break and be revisited down the road.

With inflation and interest rate hikes, now is a great time to take stock of your business’s financial situation, seek support from a small business banker, and assess what other changes might make sense for your business during this time.

This article was written by Brandon Meredith from The Enterprise and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to

This article is licensed content that was created by a third-party not affiliated with Santander Bank, N.A. (“Santander”). This article is for promotional purposes only. Santander does not provide investment, business, financial, accounting, tax, or legal advice and the content of this article does not constitute investment, business, financial, accounting, tax, or legal advice. Santander does not make any claims, promises, or guarantees about the accuracy, completeness, currency, or adequacy of any content. Santander expressly disclaims all express and implied warranties of accuracy, completeness, currency, or adequacy of the information and content in this article. Readers should consult their own attorneys or tax or other advisors regarding the applicability of any referenced information, or financial or other strategies to their own unique circumstances. This article does not necessarily reflect the views or endorsement of Santander. Please note that third-party websites may have privacy and security policies different from Santander; please review the privacy and security policies of such websites.

Santander Bank, N.A. is a Member FDIC and a wholly owned subsidiary of Banco Santander, S.A. ©2022 Santander Bank, N.A. All rights reserved. Santander, Santander Bank and the Flame Logo are trademarks of Banco Santander, S.A. or its subsidiaries in the United States or other countries. All other trademarks are the property of their respective owners.


Was this article helpful?

You already voted!