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June 2023

What You Should Know Before Taking Out an Adjustable-rate Business Loan

When considering funding for your business, an option worth researching is an adjustable-rate business loan. Adjustable-rate loans begin with a lower rate for a set period of time and are tied to the prime lending rate. This means your rate can go higher or lower as interest rates fluctuate.

There are many things to consider before accepting an adjustable-rate loan. First, can you afford to pay off the loan before the initial rate period expires? If so, you won’t have to worry about any rate hikes.


If you cannot pay off the loan in that time period, you’ll need to consider your risk tolerance depending upon whether the rate will be lower or higher when the loan adjusts. Right now, rates are starting to stabilize, and the Fed has projected that it will likely stop raising rates in 2023. If this happens, you may see your interest rate modestly drop over the next few years. Historically interest rates fall prior to a recession and in this case, an adjustable-rate loan might present lower refinance options, enabling you to get the capital you need at a discounted rate over a longer period.

If the rate spikes, however, you need to be prepared. Do you have an exit strategy? In this instance, a contingency plan might be necessary if you cannot afford the higher rate. An investor, venture capitalist, or business owner can purchase ownership in or of the company to help infuse cash and offset any interest rate induced stresses on your finances.


Another element to consider is whether the cash flow of the business can handle a higher-rate loan. Rising interest rates makes debt more expensive, so the business will require more cash to cover those higher rates.

Depending on the answers of these questions, a fixed-rate loan might be a better option, even if the rate is slightly higher than that of the initial adjustable rate.

Want to learn more? Sign up now for the Funding Strategies July 20th webinar, where we’ll discuss Smart Strategies for Working Capital Under Stress. Our experts will share their know-how about all things related to business funding and provide insights about adjustable rate loans, which could help you get the funding you need without overspending.

Is 2023 the Year of Funding for the CFO? 

The role of the Chief Financial Officer (CFO) is evolving. CFOs no longer just carry out financial oversight and focus on short-term revenue performance. Increasingly, they’re taking a longer strategic view and working closely with the CEO or business owner to develop financial opportunities and long-term value creation.


Is 2023 the year of funding for the CFO? As interest rates rise this year, CFOs can get ahead of soaring inflation and seek longer term capital for their companies. They can lock in better rates and financing terms. This can give a business wider access to lenders and more loan options as interest rates continue to rise and it becomes harder for smaller businesses to qualify for financing.

There are a number of reasons why obtaining long-term financing can be a good strategy in today’s marketplace:


  • Long-term financing usually means getting fixed interest rates over the life of a loan. This can be advantageous when interest rates are rising because a CFO locks in lower rates, protecting the company’s finances from future increases. This means the company has more predictable and manageable interest expenses which helps the CFO in budgeting and financial planning. Long-term financing can bring a measure of stability—and predictability—to a business in an inflationary market, particularly if sales drop.

  • Long-term financing can help a CFO with effective future planning for the business, i.e. growth or mergers and acquisitions. If a company has a clear debt structure, the CFO can focus more on strategic initiatives rather than worrying about month-to-month finances.

  • Long-term financing can help a business maintain a competitive advantage. If a CFO has already secured financing before interest rates rise, the company will be in a better financial position to compete in the marketplace and finance growth strategies. Plus, the overall financial health of the business will be stronger.


If you’re a business owner or CFO worried about the impact of rising interest rates, register for our July 20th, 2023 webinar titled, Smart Strategies for Working Capital Under Stress. This is part of our Funding Strategies series of online discussions with leading financial experts to help businesses learn smart ways to finance their companies. Click here for FREE early-bird registration using promo code, CAPITAL23, a $29.99 value.


The Pros and Cons of Balloon Payments


If your business is seeking short-term financing, a balloon loan may be just the ticket. A balloon loan doesn’t fully amortize over the term of the entire loan, so payments are handled differently than a traditional loan. With a balloon loan, your payments mostly only cover interest or a combination of interest and some principle.


Following this payment schedule, by the end of the loan term (which is short, usually 5 to 7 years), only a fraction of the principle has been paid off, and the remaining balance is due all at once. This is called a balloon payment.

There definitely are some pros and cons of balloon loans. The first benefit is they usually carry lower interest rates than longer-term loans, meaning borrowers won’t feel the full impact of high interest rates. Plus, you are only committing to a short-term loan. After the term ends, you’ll have an option to refinance, possibly at a lower rate.


Another positive is that you may qualify for a larger loan amount with a balloon finance package than you would with a traditional-style loan. Utilizing this type of loan can also free up your cash flow and cover finance gaps.


The biggest downfall of a balloon loan is of course the looming balloon payment which must be made all at once. There’s a chance borrowers may default on the loan if they can’t pay the remaining principle balance or can’t secure a better refinance rate at the time. Another challenge would be if you do refinance the loan but at a higher rate. Monthly payments are sure to increase with a traditional loan payment. In addition, with a balloon loan, you aren’t building much equity on any investments by the end of the initial term because the payments are focused on interest and not principle.


In all, balloon loans are often a good choice for when a project needs funds in the short term and brings in enough revenue to pay off a large lump sum of the remaining principle. A good example would be a near term acquisition: The borrower can bring in funding for the buyout while paying low monthly payments, then use the income from the sale of the completed sale to cover the balloon payment.


Tune in to The Funding University podcast, hosted by Seth Block, Executive Vice-President of ThermoCredit and founder of The Funding University. Focusing on a different funding-related topic every month, The Funding University podcast teaches companies how to leverage debt and equity by using easy-to-understand real world examples. You can tune in and listen to the most recent Funding University podcast at

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Smart Strategies for Working Capital Under Stress

July 20th, 2023

2 PM – 3 PM ET - $29.99!

Use code CAPITAL23 to attend for FREE!

(A $29.99 Savings)

Tune in for tips and strategies to determine how much working capital your business requires, how to measure working capital, and the best way to reveal shifts that might impact cash flow.


  • Strategies to manage working capital as interest rates are on the rise

  • Financing options as commercial lenders curtail new loans

  • Common errors in measuring working capital

  • How to keep your networking capital ratio in check

  • Tips to help meet your debt obligations, reduce debt service expenses, and take advantage of tax incentives

 About.  Seth Block CPA 

Seth Block is a founder and board member of ThermoCredit, LLC.  Seth has been working with the management and development of service based companies for more than 30 years. In his time with ThermoCredit, Seth has coordinated the funding for hundreds of companies in the Communications and Technology verticals. Prior to starting ThermoCredit,

Seth was a cofounder at Smoke Signal Communications,

one of the largest pre-paid competitive telecommunications carriers in the US. At Smoke Signal, Seth was CFO for two years and Senior Vice-President for 5 years. Seth’s areas of expertise are corporate development, consulting, regulatory affairs, provider relations, start-ups, and delivering funding solutions for hard to finance companies. Seth holds a degree in Accounting from Southwest Texas State University and is a licensed Certified Public Accountant.

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Seth is a well known and respected speaker at industry events, sharing insights about funding and funding options. During his career Seth has been involved in hundreds of business funding opportunities, with a total value in excess of one billion dollars. He is also the author of the soon to be published book about business finance.

“I’ve been in the world of finance for a while and I’ve acquired the business acumen to be able to share what I’ve learned. Most companies have financial leadership that understands accounting, but not the nuances of funding. There are significant differences between Banks and Credit Unions when it comes to financing.  The SBA has 11 different programs.  How do you know which one to utilize or even if you should utilize them?  Schools teach about debt and equity, but I created The Funding University to teach companies how to leverage debt and equity in the real world, using easy to understand methods.  There’s a big difference between what we learn in school and how the world of finance really works.  The Funding University is here to close that gap.”


 —Seth Block, Founder and Host of The Funding University 

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