How to Handle Interest Rate Rises as a Commercial Borrower

We’ve heard a lot of talk about the 12-interest rate rises we have had to endure since April 2022 and the impact on mortgage-holders. We have heard less about the impact on businesses who have also paid a price as inflation rises, costs increase, and consumers tighten their spending habits. When the RBA raises interest rates to curb inflation and slow economic growth, it can have a significant impact on your business and loan repayments. 

It is also important to consider the impact of interest rate rises on your customers. If you provide goods or services sensitive to changes in interest rates, you may see a decrease in demand. It is important to be aware of this and adjust your business strategy accordingly. 

Maximising Profits to Reduce Debt 

One way to handle interest rate rises is to focus on maximising profits in your business. By increasing revenue and cutting costs, you can generate more money to put towards your loan repayments. This will help reduce debt and make it easier to manage any increase in interest rates. 

Focus on increasing revenue. This could involve introducing new products or services, expanding your market reach, or improving marketing strategies to attract more customers. The key is to understand your customers’ needs and how your products or services meet those needs better than your competitors. 

In addition, and while it might seem counter-intuitive in uncertain economic times to expand via acquisition, it can improve overall profitability which can be applied to further debt reduction.  

Consider finding savings within your operations. This can include implementing more efficient processes, improving supply chain management, or reducing overhead costs – such as rent or utilities – by relocating or negotiating better terms with suppliers. 

Finally, invest in your workforce. Skilled, motivated employees (productive wages) can add further value if they are able to up-skill. Conversely, employees who are not performing well (non-productive wages) can be part of cost cutting measures. However, retaining and educating the right people will always be the most effective strategy. 

Motivated and skilled workforce can lead to increased productivity, better customer service, and ultimately, higher sales. This could involve providing training, improving work conditions, or offering incentives for exceptional performance. Remember, a happy employee is a productive one. 

Renegotiating Loan Terms with Your Existing Lender 

At Finance Advisory Co, we regularly assist clients to renegotiate loan terms with their existing lender. This can include reviewing interest rates as well as overall loan repayments which can make a significant reduction to loan commitments and therefore improve cashflow.  This can help mitigate the impact of an interest rate rise on your business. Your existing lender has a vested interest in seeing your business succeed and are often willing to support existing clients through challenging periods. 


If your existing lender is unwilling to assist, you may consider refinancing with another lender to secure a lower interest rate and potentially reduce your monthly repayments. However, it is important to carefully consider the costs and potential risks associated with refinancing before making a decision, so talking to a broker can help you determine if this is a beneficial course of action. A broker can assess your situation and make an appropriate recommendation based on your particular circumstances. 

Debt Consolidation 

The rapid rise in interest rates saw some businesses face cash-flow challenges which may have increased the amount of money borrowed or credit accessed. As things look to be stabilising again, now is a good time to consider debt consolidation options to minimise the amount of interest being paid and the amount of time to pay it off.  

All businesses have phases where cashflow isn’t as good as it can be – and getting back on track can be a matter of restructuring some of the debt you may have incurred over this period. It is possible to get your broker to renegotiate existing loan terms so you can free up funds to do things such as pay out a tax debt, catch up on creditor terms and consolidate other loans.  Having a broker will help you understand what is possible and what you can ask for. 

Thinking Ahead 

It is important for businesses to have strategies in place to handle interest rate rises. By focusing on maximising profits, finding savings, and negotiating your loan terms you can mitigate the effects of interest rate rises on your business. Remember to also regularly have your loan terms reviewed by a professional commercial broker who will be able to recommend potential changes to ensure you are making the right financial decisions for your business. 

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Credit Representative 541104 is authorised under Australian Credit Licence 389328.  Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.