#TheMoneyFactor Episode 009! Is there a recession coming? What are the warning signs?
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Is there a recession coming? What are the warning signs? That’s what we’re talking about today on The Money Factor. Hi, welcome to The Money Factor, I’m Ian Varley. Are you ready for the next recession? A lot of businesses have been submitting questions online at #TheMoneyFactor asking us about that, and what do we think, how can we help them prepare. Let’s take a few of those questions now.
As a financial expert, are you seeing any signs of a slowdown, as I’m hearing a lot of talk about a recession?
Great question. You know there is a lot of talk online at the moment and in the news. Fact is, a recession is inevitable, I’m afraid. I don’t want to be doom gloom, but the fact is, in the United States history, apparently there have been 47 recessions. So, that’s one on average every four or five years. It’s been 10 years since the last one. Everybody remembers 2008. Well, look at us now, we’re way past that. But, really and truly, there hasn’t been a great recession since then, so we know that there’s one coming. There are signs out there. A lot of economists will talk about whether it’s the housing market we can look at, whether it’s the trucking industry that we can say, okay, deliveries are slowing down. You can look at whatever signs you like. You have to look at your business and, in particular, the level of orders that you’re taking and any signs that you’re seeing from your customers about slowdown in their purchasing habits. Anything like that that you can look to. You can obviously go online and see a lot of insight there. There is one that really catches my eye called the Bowtie Economist, and it’s GraphsandLaughs. We’ll put a link on the video about this. And he’s great, he makes it entertaining. So, pick your poison, whichever source you want to look at, you’ll be able to find an answer, but my best advice is talk to your customers, what are they doing? Are they likely to slow down their business with you over the next few months? Ask them why. What are they seeing? That’s your biggest indicator.
– [Narrator] How will increasing interest rates impact my business?
– Interest rates have been on the rise, and again there’s a lot of talk whether they will continue that way or not. Obviously, we want the economy to keep growing. If interest rates go up, that impacts business confidence. Obviously, there’s a direct impact on your business if you’re borrowing money and your rates rise, if you have a loan, it’s linked to the prime rate or the LIBOR rate. That goes up, you’re gonna pay more in interest cost, and that’s going to affect your business. It may not be a significant impact initially, if it’s a half point here, half point there, but, over time, it adds up, and you need to, perhaps, adjust your budget, look at your interest cost, see if there’s a competing provider out there that will give you a better deal, a better rate, whether it’s a credit card with a promo rate, interest-free period. All those things you can look for. There’s still going to be a lot of competition. Even though interest rates may be on the rise, there’s gonna be a lot of competition for your business. So shop around, don’t just stick with your existing provider if you can get a better deal out there. But the fact is, yes, interest rates will impact the costs in your business. They will impact business confidence, which is actually probably more of a worrying fact that you need to look at. People will slow down, they’ll become cautious, and that’s where you really see business starting to level out and hopefully not drop, but it can happen. So, keep an eye on it, look at the news, see what the trends are. And stay informed because getting ahead of that curve, looking at what the impact to your business can be, is important. Remember, with factoring, our rates are actually pegged to your invoice value, so they’re not affected by interest rate rises. It’s something to consider. It actually can keep your business away from those type of cost rises that are coming down the road when interest rates rise. So, take a look at factoring. It could be a good alternative for you, as well.